Much higher OCR not impossible - ANZ

In its latest Property Focus report, the bank says it is not impossible the OCR will hit the 2007 rate of 8.25% as the RBNZ battled then to get inflation back into its target range of 1-3%.

“We don’t think the OCR will reach those lofty peaks this time around, but we certainly wouldn’t rule it out either,” Sharon Zollner, ANZ’s chief economist says.

The bank is forecasting two more 25 basis point OCR increases to provide the RBNZ with further confidence that high inflation is on the way out.

While these OCR increases will be painful for some households, especially those who took out large mortgages at low interest rates at the peak of the 2021 housing boom, the average household will still pay much less in interest costs as a proportion of their income than they did in 2007, she says.
Although predicting a 3% rise in house prices this year, Zollner says the bank certainly isn’t ruling out further house price falls from here, given a lot of the leading indicators are similar to where they were in 2022.