Yesterday's cut to the OCR was the first in four years. File photo. Photo: RNZ
New Zealanders are being told yesterday's unexpected cut to the Official Cash Rate (OCR) will provide some relief for those struggling with the cost of living crisis.
The Reserve Bank dropped the OCR by 25 basis points to 5.25 percent - the first cut in four years.
Some banks immediately lowered their lending rates, and Loan Market director Bruce Patten said the rest should follow suit by the weekend.
He said while the move to cut the OCR was unexpected, it was the right one.
"It's good to see the Reserve Bank has actually taken a bit of advice from the rest of the industry - which is the economy is in some serious strife and they needed to do something to give some relief to both homeowners and business owners as well."
Patten said there were a lot of people struggling and the OCR cut would provide some relief, but the Reserve Bank's cut had not been too drastic.
"They've still got the opportunity to pause again if the market doesn't show signs of carrying on towards their inflation markers that they want to get, with that 1-3 percent".
He said with banks making cuts in interest rates already, they might not fall much more in the short term.
But he said with the potential of two more OCR cuts before Christmas, those refixing their mortgages should feel relief before the end of the year.
Retail NZ chief executive Carolyn Young said she hoped the OCR cut would relieve the pressure on retailers.
Young said retailers had been hurting from people cutting back on their spending.
"That cut in the official cash rates alongside the small tax breaks that people are receiving in their paycheques over the month of August they're the first things that will start to give people more confidence around the economy and where they're heading."
She said that consumer confidence was critical for retail sales.
Hospitality New Zealand chief executive Steve Armitage said while they were not expecting the spend to pick up until closer to summer, it was welcome news.
"It's been very well documented that the past few years have been a challenge for our particular sector and we are hopeful that the signals a bit of light at the end of the tunnel for those operators who've just been pulling out all the stops to keep the lights on.
"It should help to lift a bit of that winter gloom particularly as we look ahead to the summer months, which are often the busiest season for our industry."
LJ Hooker NZ network head Campbell Dunoon said home buyers could now look at the market with more confidence.
"What we've been waiting for, for most of 2024, is really for the buyers to engage with more vigour than they have previously," he said.
"At the moment I think a lot of people have been on hold, they've been a bit worried about interest rates obviously, and they've got a feeling that they may be coming down soon," he said.
"But to actually see it happen I think has been the tipping point. So I expect some activity heading into spring."
The next OCR announcement will be in October.