📌 Quick Summary:
- OCR cut to 3.50%: The RBNZ has dropped the cash rate by 0.25% and is open to cutting further.
- Global trade tensions rising: US tariffs are dampening global demand, but NZ remains relatively insulated.
- Mortgage rates likely to drop: Lower OCR should flow through to fixed rates over time.
- Borrower strategy: Consider floating short-term, splitting rates, or reviewing fixed terms in light of the easing bias.
The Reserve Bank of New Zealand (RBNZ) has just dropped the Official Cash Rate (OCR) by 0.25%, bringing it down to 3.50%. No big surprises there — the writing’s been on the wall for some time with the trend having shifted in Spring 2024. Inflation remains comfortably within target, but global risks are building, particularly with the return of tariff-heavy U.S. trade policies.
So what does all of this mean for you as a borrower? Here’s how to manage your mortgage over the coming weeks as fixed rates begin to respond to the OCR change.
Strategies for Borrowers Right Now
- Consider Floating Short Term While Fixed Rates Catch Up
The general trend for interest rates is downward. While floating rates are already lower, many lenders haven’t yet passed on reductions to fixed rates. If you’re expecting better fixed specials to land soon (e.g., a 12-month rate at or below 4.99%), it may be worth floating temporarily.
Example: If you float at 6.49% while waiting for a 12-month fix at 4.99%, your breakeven wait time is about 7 weeks. We’re monitoring this daily for clients currently on floating.
- Use Comparative Rate Analysis
If rates stay unchanged, a 12-month fix at 5.19% is like doing 6 months at 5.79%, then another 6 months at 4.59%. For longer-term comparisons, think of a 2-year at 4.99% vs. a 3-year at 5.29% as the 3-year being like 2 years at 4.99%, followed by 1 year at 5.89%.This helps you weigh whether to lock in now or wait — especially if specials emerge quickly.
- Lean Slightly Short-Term
With the RBNZ signalling further easing below its neutral rate range (around 3.00%–3.25%), fixing for 6 to 12 months may better align with the expected trend.
- Split Your Loans
Even though we expect further easing, it’s wise to hedge. A mix of short and medium terms lets you benefit from falling rates while protecting against global volatility. Remember, if global inflation flares up from trade shocks, longer-term rates may stay elevated.
What the RBNZ Actually Said
The RBNZ sees inflation as comfortably within its 1–3% target range, giving it room to cut the OCR further if needed. The key concern? Slowing global growth from rising tariffs, especially out of the U.S.
While household spending and residential investment in NZ are still soft, a lower NZ dollar and stronger export prices are helping offset that. Oil prices and diverted trade flows could help bring down import costs.
The Committee flagged that downside risks to growth and inflation have increased — and that the full impact of OCR cuts since 2024 has yet to be fully felt.
In short: they’re cautious but open to further easing if needed.
Global Trade Wars and NZ Exposure
The return of protectionist trade policies in the U.S. is sending shockwaves through global markets. Higher tariffs = lower global demand and more uncertainty — not great for business or consumer confidence.
But NZ is relatively well-insulated. The U.S. only accounts for around 10% of our export market. China and Australia remain our major trading partners, and that’s likely to remain the case. While softer demand out of Asia will have some impact, the broader effects here will be more muted than elsewhere.
Still, we’re not entirely immune. Trade diversion, global supply chain shifts, and asset price adjustments could still influence our inflation and growth outlook over time.
Market Mood & Property Activity
Lower rates typically reduce debt servicing costs — and that can improve borrowing power, especially if Debt-to-Income (DTI) ratios loosen slightly in response. We’re seeing pre-approvals across the board: first-home buyers, movers, and investors are all back in action.
Pre-approvals are taking 5 to 20 working days, depending on the lender. If you’re preparing to purchase, talk to us early. Most approvals last 3 months (plus a 3-month extension), and longer terms are possible for new builds.
Final Thoughts
In short, this is a positive environment for borrowers. While global events are creating some uncertainty, the RBNZ has room to respond — and is already doing so. Fixed mortgage rates are likely to fall, and we expect more movement in the coming weeks.
✅ If you’re on floating: let’s keep a close eye on rates and review weekly.
✅ If you’re fixing soon: use comparative thinking and consider a mix of terms.
✅ If you’re buying or restructuring: now’s a good time to act before rates reset.
Want to review your mortgage or investment strategy? We’re here to help. Get in touch.
