Official Cash Rate Reduced to 3.5%: What It Means for Mortgages and the Economy

New Zealand Reserve Bank OCR cut announcement

On April 9, 2025, the Reserve Bank of New Zealand (RBNZ) announced a reduction in the Official Cash Rate (OCR) to 3.5%, down from 4.0%. This decision was made in response to economic pressures and is expected to have significant implications for New Zealand’s housing market, mortgage rates, and overall economic conditions.

What Does the OCR Reduction Mean?

The OCR is a key tool used by the RBNZ to manage inflation and economic growth. By lowering the OCR, the central bank aims to stimulate economic activity by making borrowing cheaper. This reduction is expected to have the following effects:

Lower Mortgage Rates: Mortgage lenders typically adjust their interest rates in response to changes in the OCR. This could mean lower rates for homebuyers and homeowners refinancing their loans.
Increased Housing Market Activity: Lower mortgage rates could make home loans more affordable, potentially boosting demand in the housing market.
Economic Stimulus: Cheaper borrowing could encourage consumer spending and business investment, helping to drive economic growth.

How Will Mortgage Rates Be Affected?

As banks typically follow the OCR movements, it’s anticipated that the reduction to 3.5% will result in further cuts to fixed and floating mortgage rates. Already, several major banks, including ANZ, ASB, BNZ, and Westpac, have adjusted their rates in anticipation of this change. Here are the current rates:

ANZ: 6.49% (6 months), 5.89% (1 year), 5.29% (special LVR)
ASB: 5.25%
BNZ: 5.29% (special LVR)
Westpac: 5.89% (1 year), 5.29% (special LVR)
TSB: 5.29% (special LVR)

*Rates may vary daily. Always confirm with the provider.

What Does This Mean for You?

If you're a first-time homebuyer or are looking to refinance your mortgage, this could be an excellent opportunity to lock in a lower rate. Even a small reduction in your mortgage rate can save you thousands over the term of your loan. Consider speaking with a mortgage broker to see how this reduction can benefit you.

Frequently Asked Questions

Will all banks reduce their rates?

While most banks are expected to lower their rates following the OCR reduction, each bank has its own policies. It's important to compare offers and consider using a mortgage broker to secure the best deal.

How long will the OCR stay at 3.5%?

The OCR is reviewed regularly by the RBNZ, and future changes will depend on economic conditions. If inflation remains under control, the OCR may stay at this level for some time.

Can I refinance my mortgage now to take advantage of the lower rates?

Yes, refinancing could allow you to secure a lower rate, especially if your current loan is at a higher interest rate. Speak with your bank or a mortgage broker to explore your options.

Next OCR Meeting & Future Rate Cuts

The next OCR review will take place on May 28, 2025, where the RBNZ is expected to evaluate economic conditions further. Given the current economic climate and global market pressures, there is a possibility of further rate cuts. Some economists are predicting that OCR could drop to 2.75% by the end of the year. This could lead to even lower mortgage rates, so it’s a good idea to keep an eye on further announcements.

Final Thoughts

The RBNZ's decision to lower the OCR is a significant move aimed at supporting economic growth. If you’re in the market for a home or looking to refinance, now is a great time to take advantage of potentially lower mortgage rates. As always, ensure you shop around and consult with a professional to find the best deal for your circumstances.

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📌 About the Author

Kiwi Money Matters is written and maintained by a New Zealand-based writer with hands-on experience in finance and accounting since 2015.

All posts are personally researched, written to ensure clarity and trustworthiness for everyday Kiwis.

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