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The latest OCR announcement is just around the corner, and the New Zealand interest rate outlook is looking increasingly uncertain. With surprise resignations and new tariffs dominating headlines, questions are mounting about what the Reserve Bank’s next move will be—and what that means for everyday Kiwis.
From shifting global trade policies to changes in leadership at the Reserve Bank, this episode breaks down how these developments could shape interest rates, inflation, and your mortgage in the months ahead.
Tariffs, Inflation, and the OCR: What’s the Connection?
The biggest headline at the moment? Donald Trump’s return to tariff talk, with plans to implement sweeping import taxes:
10% on all imports
34% on goods from China
46% on Vietnam
20% on the EU
These aren’t just random numbers—they could have real impacts on global inflation and trade. While some might expect these tariffs to slow down interest rate cuts due to a short-term rise in inflation, there’s also a strong argument that economic uncertainty might force the Reserve Bank to cut rates more aggressively.
That’s why the New Zealand interest rate outlook is now so complex. If global trade slows and our biggest partners—like China, Australia, and the US—begin to stall, New Zealand’s economy will feel the ripple effect. In that environment, cutting rates faster could help soften the blow.
“We are a nation set up to trade. If our biggest economies are slowing down, that’s going to have some real impacts.”
The Case for a 0.50% Cut (But Expect 0.25%)
There’s a general consensus that the Reserve Bank will stick with a 0.25% cut, in line with previous movements. But the case is growing stronger for a more aggressive 0.50% cut.
While sentiment has improved slightly, business performance and asset prices haven’t taken off. A bold move could signal that the Reserve Bank is ready to support the economy and prevent another dip in consumer and business confidence.
“Let everyone know the RBNZ has your back. We need to pump some life into the economy—it’s not performing well.”
Still, markets have already priced in a 0.25% cut, and with short-term mortgage rates largely unaffected by the OCR in recent months, many Kiwi households may not feel any immediate impact.
Adrian Orr Exits the Reserve Bank
The other big shake-up? Adrian Orr has stepped down as Reserve Bank Governor, with his term ending on 26 March—12 months earlier than expected.
Why the early exit? There’s speculation of tension with Finance Minister Nicola Willis, particularly around bank capital requirements. Orr was a strong proponent of higher reserve levels, aiming to make the financial system more resilient.
But not everyone agrees with that approach.
“All you are doing is stopping the transfer of wealth from older generations to younger ones by making it harder to obtain credit.”
Willis is reportedly keen to loosen these rules, believing that overregulation could drive up lending costs and stifle credit availability. That aligns with our own view: a well-capitalised banking system is important, but not at the cost of economic growth.
So, What’s Next for the OCR—and Mortgage Rates?
We’re calling a 0.25% cut this week. But in our view, a 0.50% cut would be better for the economy. That said, most short-term mortgage rates haven’t moved much after past cuts, so don’t expect immediate relief.
In terms of home loan advice, we’re seeing more clients favour one-year fixed rates over six-month terms. The margin on short-term rates has crept up, making one-year rates like 4.99% more attractive.
As for where rates will be by the end of the year? It’s anyone’s guess. With so much global uncertainty, it’s more important than ever to think about your long-term financial strategy.
Key Takeaways
Tariff tensions are back, with Trump proposing major import taxes that could impact global inflation and trade dynamics.
The Reserve Bank is likely to stick with a 0.25% OCR cut, but some believe a 0.50% cut is needed to stimulate the slowing economy.
Adrian Orr has stepped down as Reserve Bank Governor, possibly due to tensions over bank capital requirements.
Finance Minister Nicola Willis favours loosening reserve rules to help ease lending pressures and keep credit flowing.
Most short-term mortgage rates haven’t shifted much with past OCR cuts—one-year fixed rates currently offer the best value for many borrowers.
With economic uncertainty rising, it’s crucial to focus on long-term financial planning rather than short-term predictions.
Next Steps
Need help reviewing your mortgage or financial strategy? Get in touch with the Lighthouse Mortgages team. We’re here to help you make smarter money moves—no stress, no guesswork.
If you’d like to learn more, check out these other episodes below.
For a no obligation discussion to see how we can help you on the path to wealth, please contact us.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
