After a turbulent 2024, the Official Cash Rate drop in 2025 is finally here.
This shift impacts mortgages, investments, and savings, leaving many wondering what it means for their finances. This is great news for borrowers, but what does it mean for homeowners, investors, and those with money in term deposits? Let’s break it down.
The Reserve Bank of New Zealand (RBNZ) has been increasing the OCR for several years to combat inflation. However, now we’re seeing a shift in the opposite direction. While no one can predict the future with certainty, the expectation is that we will see a 50 basis point cut—a significant move that signals a transition to a lower interest rate environment.
However, this is likely to be the last of the big cuts, with the RBNZ taking a measured approach to ensure they don’t overstimulate the economy.
Global markets always play a role in New Zealand’s financial decisions, and the US is a major driver. With recent inflationary pressures from policies in the US, including tariffs and economic policies under Trump’s leadership, there is some concern that these could delay or slow down New Zealand’s own rate cuts.
Why does this matter? The US dollar is the world’s reserve currency, and financial trends there affect the cost of money globally, including here in New Zealand. While external factors like this will always be considered by RBNZ Governor Adrian Orr and his team, the domestic economy remains their priority.
Many homeowners are wondering whether a 50-basis-point cut in the OCR will translate to a significant drop in mortgage rates. The answer? Not necessarily.
Some banks have already introduced mortgage rates with a “4” in front of them, which is an appealing prospect for borrowers. However, before locking in a rate, it’s crucial to consider all factors, including potential rate movements and personal financial circumstances.
If your fixed mortgage rate is rolling off soon, now is the time to take action. Here’s what to consider:
While mortgage holders celebrate lower interest rates, those with money in term deposits may be less thrilled. As interest rates fall, so do returns on term deposits, making it less attractive to keep large amounts of cash locked away.
A few key considerations:
The upcoming OCR cut is a significant shift, but it’s important to approach any financial decision with a well-rounded perspective. If you have a mortgage rolling off soon, or if you’re looking for smarter ways to invest your money, now is the time to seek professional advice.
At Lighthouse Financial, we help clients make informed financial decisions. Whether you need guidance on mortgage structuring, investment strategies, or financial planning, our team is here to help.
Get in touch today to discuss how you can make the most of the changing financial landscape.
Want to chat about your mortgage or investment strategy? Book a time to chat with the team here.
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.
