RBNZ: house prices may rise 7% a year in next two years

Orr stressed that the forecast comes with “an even bigger health warning” than its other economic forecasts because of the inherent difficulties of making such forecasts.

But “relative to our history, that sounds insipid,” Orr said, adding that the starting point for house prices is still very high because, even with the about 17% fall in house prices from their peak in November 2021, house prices remain at the very top end of what RBNZ regards as sustainable.

Orr warned that it isn't only the OCR that influences mortgage rates and that global pressures on longer-term interest rates may mean that fixed-rate mortgage interest rates may not fall much further.

Even with the OCR projected to fall to nearly 3% by 2027, average mortgage rates may not fall from the current 6.4% to about 5.8% because of the impact of offshore funding costs on banks, he said.