Rate cuts help – but they won’t fix a broken housing market

By Madison Burgess-Smith

First published on the The Post.

Last month the Reserve Bank cut that mysterious lever that turns my mortgage into either a minor inconvenience, or a total nightmare, to 3%. Economists say this is the lowest it’s been in three years and should be a “shot in the arm” for the economy. Which, frankly, sounds like vaccinating something that is already very, very unwell.

I bought a house a couple of years ago. In my 20s, it was supposed to be my grown up, glow-up moment: keys in hand, mortgage signed, Resene loyalty card secured, smug sense of security achieved. Then my interest rate swerved from a dainty 2.2% to a sweltering 7% and I became the friend that said “sorry, can’t, mortgage” so regularly I should have just printed it on a bloody t-shirt.

Nights out? Gone. DIY dreams? Gathering dust. My diet? Almost entirely dictated by whatever protein had a yellow sticker at the supermarket. The difference in repayments? Tens of thousands a year.

This was not the deal we were sold. We were told: “Buy a house, that’s security.” Eat less brunch. Save harder. Move back in with mum if you have to. Do all the joyless, disciplined things. And we did. Only to discover that home ownership in New Zealand doesn’t come with stability, it comes with a permanent sense of being a couple of bad OCR shifts away from selling your kidney on Trade Me.

So when the Reserve Bank cuts rates, I may not be popping the Lindy bubbles, but I am relieved. Over the next few months as I go to re-fix my mortgage, like thousands of other Kiwis, I'll get a bit of breathing room back.

For some families it will mean something as consequential as swimming lessons being back on the table. For me it's probably trading the polished concrete floors of Pak 'n Save for the lino tiles of New World, a few weekends away and the chance to say “sure” more.

I also get the bigger picture, rate cuts this deep usually mean the economy isn't feeling so flash. But it also shows we’re avoiding the worst-case scenarios: inflation is no longer spiralling and people aren’t defaulting on their mortgages en masse. Though, if you’ve ever stared too long into your budget spreadsheet at 1am, you’ll know how seductive the idea of defaulting briefly becomes.

And that breathing room isn't luck, it's policy and monetary settings starting to work together.

But the real problem goes beyond my supermarket snobbery. The OCR can make our mortgages less terrifying, but it can’t fix the fact that wages haven't kept pace with house prices or that housing has become New Zealand’s favourite get-rich-slow scheme. A rate cut helps those of us already on the ladder, but the real challenge is making sure the ladder isn’t pulled up behind us.

Which is why Chris Bishop’s blunt “house prices need to fall” actually mattered. It freaked out the property-owning classes (hi, yes, negative-equity here, thanks Chris) – but he’s right. Unless my generation can actually get into homes, they’ll keep moving overseas to places where they can, and then it won’t matter that I own one because I’ll be sitting alone in my expensive lounge with nobody left to hang out with.

We can’t keep treating housing like our national retirement plan, because what good is your family home doubling in value if your kids can’t afford to live anywhere near you?

I think the bit worth popping the bubbles for is the less immediate, less sexy stuff. It’s consenting reform, infrastructure investment, and forcing councils to say “yes” more often than “no, it ruins the vibe”.

It’s building more homes. The cool, dense, well-connected type, where you can work, eat and play within walking distance of your front door. Rather than just the lame ones, marooned miles away in soulless new developments with names that are just two words smooshed together, like Meadowview, Pinehill, or Brookfields. (You know, the places where joy goes to die.)

None of this is overnight magic, but for once it feels like the system is bending toward actually building affordable homes, rather than just toggling with the lever that allows us to trade the same old ones over and over at ever higher prices. For the first time in a long time, we are seeing house prices heading south and with it, an influx of cautiously optimistic first home buyers open-homing on a Sunday.

So yes, a drop in the OCR matters to me. But fixing the housing market matters way more. Because at the end of the day, I don’t want to be the last of my friends left holding house keys in a country everyone else has already given up on.