Opportunity or risk?
The economic landscape in Aotearoa has been choppy over the last few years, going from extreme highs followed by inflation and then extreme belt tightening as the OCR increased from 0.25 in June 2021 to 5.50 in May 2023. But with recent cuts including the 0.50% drop to 3.75% on the 19th of Feb 2025, what should Māori be considering?
To start off it’s worth explaining in simple terms what the Official Cash Rate (OCR) is and why it matters.
The OCR is the interest rate set by Te Pūtea Matua - The Reserve Bank of New Zealand. It’s the rate at which banks borrow money from the central bank. This rate influences the interest rates banks charge customers for loans and the interest the banks pay on term deposits or savings accounts (interest bearing accounts).
When the OCR drops, borrowing becomes cheaper, and bank affordability test rates change meaning in many cases customers can borrow more. However, cheap money and easier borrowing environments often leads to higher house prices, reducing affordability.
On the flip side, when the OCR rises, loans become more expensive, impacting the ability of current homeowners to service their lending and the borrowing ability of those looking at getting into the market.
For more, check our the following video:
Home Ownership
The 2023 census data from Stats NZ (2023) indicate that Māori home ownership rates have dropped from 31.2% in 2013 to 27.5% in 2023.
https://tewhata.io/all-new-zealand/social/housing/home-ownership/
The gap between the Māori home ownership rate of 27.5% and general population home ownership rate of 42.1% would be even wider if Māori data was to be separateed from the overall New Zealand statistics.
However, for the purpose of this tuhinga represents a long-standing structural challenge that has limited the ability of Māori whānau to build security and intergenerational wealth through housing and the banking system.
Te Pūtea Matua recognises that lower borrowing costs introduces more money into the market and will contribute to house prices increasing. While lower interest rates might seem like an opportunity for buyers, the reality is that many people are thinking the same thing, this increases the competition in the market leading to higher house prices and the risk of exacerbating housing affordability issues for many hapori – communities in Aotearoa. In particular Māori given our low home ownership rates.
Housing like most investments is a long-term game and the best time to buy was yesterday. Without getting technical around inflation, supply and demand etc, home ownership is an avenue towards increasing the wealth (including intergenerationally), financial stability, long-term thinking and reduced future cost of housing once your home loan is reduced or paid off.
Given you are reading this tuhinga, it shows that this Kaupapa is of interest. Regardless of if you are a first home buyer, home owner looking to buy again or reviewing your interest rates, find a local mortgage Advisor or Broker and let them do the mahi to find you the best deal or what your lending affordability is.
Māori Business Finance
Ki tō ngā pakihi, several recent studies show that Māori businesses have lower levels of debt and those that do are paying higher interest rates. This higher interest cost is directly related to low Māori home ownership rates and the fact that most Māori business lending is asset finance or unsecured (non-property-backed lending). This lending has higher risk weightings from Te Pūtea Matua meaning the banks must hold more capital (profit or shareholder investment) and this increase in capital cost is passed on to customers, meaning Māori businesses in most cases have a higher cost to deliver and / or have limited access to bank lending to grow their business.
There is a perception that having low levels of debt means that Māori businesses are less susceptible to interest rate fluctuations, but the impact of a falling economy outweighs any small benefits this presents. If anything, lower access to bank lending when the economy is in a good position has limited the profitability of Māori businesses and their ability to weather economic downturns.
OCR changes for Māori business have less of a direct impact and more of an indirect impact through costs of goods and services, consumer spending and confidence, and exchange rate fluctuations to name a few things.
It’s important to understand that Māori see self-employment and whānau business as an opportunity to increase household income as a progression towards home ownership. With most Māori owned businesses hiring more staff, including more Māori then non Māori businesses. This same collective waiaro – attitude needs to be taken into Māori home ownership conversations and journeys as it reduces costs, reduces risk and brings forward home ownership goals.
Titi te taiaha ki te whenua
At RŌA Consulting, we see the need for economic growth as an opportunity for regulators, banks and the Crown to level the playing field for Māori business growth and increased home ownership by establishing a business finance guarantee scheme for SMEs that lowers borrowing costs, expanding risk weighting settings beyond housing equity measures and introducing mandatory ethnicity (and gender) reporting within banking licenses requirements. In addition, a loan-to-value ration for first generation homeowners needs to be established backed by a Treasury guarantee as many current schemes are far too restrictive and don’t recognise intergenerational inequality.
Ngā mihi nui,
Teahooterangi Pihama
RŌA Consulting Limited
