The Reserve Bank of New Zealand (RBNZ) has reduced the Official Cash Rate (OCR) by 25 basis points to 3.25%. This marks the fifth drop since August last year – The OCR has now fallen a total of 225 basis points from its 2024 peak of 5.5%.
The decision didn’t come as a surprise, but interestingly it wasn’t a unanimous decision. One member of the Monetary Policy Committee preferred to leave the OCR unchanged. This suggests the RBNZ is treading carefully, balancing recovery with the risk of inflation picking up again. Regardless, this is still great news for borrowers especially with more cuts potentially on the horizon.
Why did the RBNZ cut the OCR?
The RBNZ are juggling a few trends:
- Inflation is easing: Inflation increased to 2.5% in the March 2025 quarter. The overall cost of living is slowing which is giving The Reserve Bank more room to lower rates, but we’re still seeing higher costs for things like food and electricity.
- The economy is recovering: New Zealand’s economy is slowly on the mend. Lower interest rates and strong export prices are helping support this recovery.
- Internationally, rising tariffs and uncertainty around policy (especially in the US and China) are slowing global growth but it actually helps reduce inflation pressure here in New Zealand.
What does this mean for you?
This could be a great opportunity to review your current structure, especially if you’re due to refix soon. Here’s why:
- Rates are falling: Floating and fixed rates have already dropped in response to this cut.
- Banks are jumping in early: We’re seeing some lenders contacting clients far too early! – In this environment, it’s often best to wait until just before your term ends to make a decision. The right strategy could save you thousands!
- Now is the time to get strategic: There is no one-size-fits-all approach! We’re exploring a range of options with clients right now and it’s all dependent their situation.
The right structure depends on your goals, risk profile, and timing. The Mortgage Supply Co is here to help you make sense of it all and guide you towards the best decision for your situation.
Need help securing finance or deciding when to refix?
Let’s chat! We’ll help you make sure you’re locking in the right rate at the right time!
