UPDATED 6.48PM: The Real Estate Institute says today's cut to the OCR will give home buyers confidence.

A softer economy and low inflation has seen the Reserve Bank cut 25 points off the OCR this morning.

Real Estate Institute chief executive Colleen Milne said buyers will take note that interest rates are remaining pretty stable.

However, she thinks lower interest rates will put pressure on house prices in Auckland.

Reserve Bank Governor Graeme Wheeler’s reduced the OCR to three percent today and suggests further cuts are likely.

He said the economy is growing at an annual rate of around two and a half percent but the outlook is now softer than at the time of last month’s monetary policy statement.

Wheeler said rebuild activity in Canterbury appears to have peaked and the world price for dairy exports has fallen sharply.

The dollar’s declined significantly since April and, with lower interest rates, has led to an easing in monetary conditions.

New Zealand Mortgages and Securities director James Kellow said banks are already slashing their one and two year rates below five percent.

But he said the Reserve Bank has tightened up borrowing rules and new LVR and tax changes will target housing investors.

Labour MP Grant Robertson claims the decision to cut the OCR is a direct result of the fact the economy is stuttering along at the moment.

He believes there's no doubt the Reserve Bank Governor will have been concerned about pouring petrol on the overheated Auckland housing market.

"In the end, the slew of poor economic data coming in at the moment means that he had to act," Robertson said.

Two minutes after the announcement, Kiwibank announced it's made an immediate cut to floating mortgage rates, bringing them down to 6.15 percent.

It will kick in now for new customers and in two weeks for existing customers.

ASB expects two more 25 basis point reductions to the OCR in September and October, to push inflation back up towards two percent.