The OCR Held at 2.75%. Here's What It Changes for Investors (and What It Doesn't)
At two o'clock on Wednesday, I had a client on the phone who was already doing the maths on a 3% OCR. So was just about everyone else. Money markets had a hike all but locked in, and every major bank economist had pencilled in a third increase in a row.
Then the Reserve Bank held at 2.75%.
It was a genuine surprise. But once the dust settles, I don't think it changes how a good investment property should be assessed. Here's why.
What actually happened
The Monetary Policy Committee voted 4–3 to hold. Governor Anna Breman sided with the hold. Chief Economist Paul Conway was one of the three who wanted a hike.
The reasoning was fairly simple. The Bank lifted rates in July and again in September, and it wants to see those increases work through first. September-quarter inflation also came in at 3.7%, lower than expected. Wage growth and household spending remain soft.
The part investors shouldn't skip: all seven members agreed tighter policy is still likely to be needed. The debate was about timing, not direction. The next decision is on 9 December, with fresh forecasts.
What it means for borrowing costs
Floating rates don't move on a hold, so they're sitting around 6.3% at the main banks.
Fixed rates are a different story. They're priced off wholesale swap rates, and the one-year swap rate dropped about 20 basis points after the announcement. Westpac's chief economist Kelly Eckhold flagged that six-month and one-year fixed rates could ease a little if that holds.
As of Wednesday, the lowest advertised specials were around:
4.75% for six months
4.95% for one year
5.3% to 5.4% for two years
5.4% to 5.5% for three to five years
The longer view hasn't shifted much. Westpac still expects a hike to 3% in December and sees the OCR peaking around 4% in late 2027. That's one bank's forecast, not a certainty, but it tells you which way the wind is blowing.
The fundamentals we consider don't change with the headline
When interest costs are moving, the property itself has to carry more of the load. That's why every property I bring to an investor goes through the same five checks, whatever the OCR did that week:
Location and rental demand. Who rents here, and will they still be renting here in five years?
Yield that stacks up on real rents. Real, achievable rents — tested against the rate you might refix at, not just today's special.
Builder track record and build quality. A new build is only as good as the people who put it up.
Tenant appeal and compliance. Healthy Homes compliance from day one, and a layout tenants actually want. Right now, home-and-income properties with two garages are the strongest demand signal we're seeing in the market.
Long-term hold. Does it still make sense if you hold it for ten years and rates don't go your way?
A hold like this one can make short-term rates look tempting. That's a conversation to have with your mortgage adviser, because structure depends entirely on your situation. My job is the other half: making sure the property holds up whatever the rate does.
Why new builds still matter in this market
New builds are generally exempt from the Reserve Bank's loan-to-value speed limits and debt-to-income caps that apply to existing property. Your lender's own criteria still apply, so check the detail with your adviser. Add lower maintenance in the early years and compliance built in, and the case for new over old holds up in a rising-rate environment.
My take
A hold isn't a turn. Rates are still more likely to rise than fall from here, and December is very much in play. The investors who come through this well won't be the ones who timed the OCR. They'll be the ones who bought a property whose numbers work on real rents at realistic rates.
If you'd like a second opinion on a property you're weighing up, or want to see what's passed our filter lately, get in touch.
— Russell Benshaw, Managing Director, KEY2Invest
This article is general market commentary for information only. It is not financial, investment or lending advice and does not take your personal circumstances into account. Please talk to a qualified financial or mortgage adviser before making any decisions.