The Official Cash Rate (OCR) plays a critical role in shaping both the housing market and the wider economy. In this episode, the team unpacks the latest OCR cut and what it means for your mortgage and New Zealand’s economic outlook.
The OCR Cut and Its Immediate Impact
The Reserve Bank’s 25 basis point cut to 3% came as no surprise – banks had already priced it in. While the cut itself was expected, the real focus now lies on the tracker: what will happen next?
Some economists argue this is the last cut, while others suggest the OCR needs to fall further – potentially to 2.5% – to properly stimulate the economy. Others believe holding steady may be the safer path. These contrasting views highlight the uncertainty around the OCR and its role in stabilising inflation while supporting growth.
Inflation, Sectors, and the OCR’s Limits
Inflation is currently sitting within the 1-3% target band, at around 2.7%. But much of this inflation – like insurance, power charges, or global commodity-driven food prices – can’t be controlled by the OCR. Raising rates in response only risks creating more pain for households without addressing the real drivers of rising costs.
The OCR’s impact is also uneven across sectors. Farming, for example, has seen some recovery, while Auckland and Wellington are struggling – Auckland due to population pressures, Wellington because of slashed government spending. In reality, the pain people feel depends more on their industry than their location
What It Means for Your Mortgage
Interest rates have already started to soften, with some short-term mortgage rates sitting as low as 4.79%. Mortgage brokers are working to secure clients the lowest possible rates and lock them in for longer terms when the market bottoms out.
The challenge is timing. While a one-year rate may look attractive now, the expectation is that rates could reach their lowest point in the second quarter of next year – making strategic structuring more important than chasing the cheapest deal today.
Key Takeaways
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The Reserve Bank cut the OCR by 25bps to 3%, a move widely expected.
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The real uncertainty lies in what comes next – further cuts, a pause, or even an eventual rise.
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Inflation is within the target band, but much of it is beyond the OCR’s influence.
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The economy is uneven – farming is holding up while government-reliant sectors are under strain.
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Mortgage rates are softening, but the key is timing your fix for when rates bottom out.
Next Steps
If you’re looking to refinance, secure a cashback, or simply review your mortgage structure, reach out to Lighthouse Mortgages for smart, specialised advice tailored to your situation.
If you’d like to learn more, check out these other episodes below.
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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.
