Our latest discussion dives into OCR predictions and what shifting economic conditions might mean for households. From spending behaviour to bank cash-backs, we unpack how the next OCR move could influence whether mortgage rates fall further across New Zealand.
What the Latest Data Means for OCR Predictions
When we look at what’s driving the next OCR move, one thing is clear – the headline cut itself isn’t the main event. What really matters is what the Reserve Bank signals about what happens next.
Despite a recent 50-basis-point cut, the market barely reacted. Banks passed through only a fraction of the reduction – in some cases as little as four basis points on short-term rates – showing that OCR shifts don’t always translate directly into everyday mortgage pricing.
Inflation remains messy and largely driven by uncontrollable essentials: rising council rates, higher insurance costs due to climate-related risk, and the ongoing lift in grocery prices.
Meanwhile, spending data shows Kiwis are still cautious. Overall electronic card spend rose just 0.2%, driven entirely by essentials, while discretionary categories – apparel, hospitality, motor vehicles – all declined.
Even with some households rolling off 7% mortgages onto the mid-4s, increased disposable income hasn’t yet translated into meaningful extra spending. Most people appear focused on rebuilding buffers after a tough few years.
Will Mortgage Rates Fall Further? The Case for 25 vs 50
As we look ahead to the next OCR announcement, two scenarios are on the table: a 25-point cut or a more aggressive 50-point move.
The “base case” is 25, but many argue a 50-point cut is needed to rebuild confidence and stimulate an economy still feeling sluggish despite improving interest-rate relief. The conversation suggests the economy is weaker than the data shows, and a stronger policy push may be needed to shift sentiment and get spending flowing again.
There’s also debate around whether the Reserve Bank risks moving too slowly. If the plan is 25 now and 25 later, why not simply get on with a 50-point cut? Waiting could prolong economic hesitation, especially with inflation trending down and most borrowers on shorter fixed-term cycles that allow changes to flow through relatively quickly.
However, the wildcard is summer. A slow, rainy season may keep spending depressed, easing inflation and supporting deeper cuts. A booming summer, on the other hand, could reignite demand – making banks and policymakers more cautious about fuelling inflationary pressure.
How Banks Are Responding: Cash-Back Competition
While everyone waits for the next OCR move, banks aren’t standing still. ANZ has rolled out a 1.5% cash-back offer – roughly $30,000 on new lending – and the rest of the market is already lining up to match it.
This intense competition suggests lenders are hungry for business even as the broader economy stalls. But eligibility criteria matter, and not all cash-backs are equal. Refinancing or restructuring decisions should factor in long-term cost, not just upfront incentives.
Regional Differences and Why Infrastructure Matters
While national sentiment is mixed, the economic picture varies sharply across regions. Parts of the South Island – Christchurch and Queenstown in particular — are performing strongly, supported by modern infrastructure and liveability advantages that continue to attract growth.
By contrast, Auckland and Wellington face ongoing struggles compounded by ageing infrastructure and reduced confidence. These regional divides may influence household spending behaviour – and ultimately help shape the Reserve Bank’s future OCR decisions.
Key Takeaways:
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OCR cuts aren’t always passed through by banks – especially to fixed rates.
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Inflation is being driven by unavoidable essentials: council rates, insurance, and groceries.
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Despite lower mortgage rates, Kiwi spending hasn’t meaningfully increased yet.
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A 25-point cut is expected, but many believe a 50-point cut is needed to rebuild confidence.
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Summer spending will play a major role in shaping future OCR decisions.
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Banks are aggressively competing with cash-backs, signalling strong appetite for lending.
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Regional economic performance is diverging – particularly between the South Island and major North Island centres.
Next Steps:
If you want to understand which bank, cash-back offer, or mortgage structure fits your situation as rates shift, book a chat with our Lighthouse Mortgages team for personalised guidance.
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.
