Yesterday the Reserve Bank announced another 0.25% cut to the Official Cash Rate (OCR), reducing it to 3%. More importantly, they signalled further reductions are coming. The OCR is expected to reach around 2.5% by March 2026.
Economists are predicting another cut in October, with one more likely to follow early next year. Something interesting to note – two of the six Reserve Bank committee members voted for a larger 0.5% cut this time round.
What does this mean for you?
- If you’re on floating rates, banks have already begun cuts, with some trimming floating rates within hours of the announcement.Â
- If you’re on a fixed rate, wholesale swap rates are easing too. These are the international funding markets (largely US-based) where NZ banks source money. When swap rates drop, banks borrowing costs fall, giving them more margin to pass onto Kiwi borrowers in the form of lower fixed interest rates.
We have seen some movement on the short term fixed rates in the lead up to the OCR, many banks pricing in the cut ahead of time. - Market outlook: While the housing market in main centres remains subdued, regional areas are showing more activity and increased buyer enquiry.
For a deeper dive into what’s happening around the country, check out the latest Cotality Property Insight HERE
For all borrowers, this does create some good opportunities:
- Refix strategy: Shorter-term fixes could leave you better placed as rates continue to fall over the next year.Â
- Restructuring lending: Lower rates can also free up cash flow or allow you to speed up debt repayment.
Overall, this is good news for homeowners and buyers. With rates expected to drop further, now is a good time to review your lending strategy and make sure you’re positioned to benefit.
If you’d like to chat on what this means for your situation – whether you’re refixing soon, restructuring your lending, or planning your next purchase – get in touch, we’re here to help!
