OCR Cuts, Mortgage rates, and what It means for you

Why OCR Matters for Your Mortgage

The OCR is the rate the Reserve Bank sets to influence the economy. When it drops, banks usually follow with lower lending rates. This can ease pressure on borrowers, but the impact isn’t instant:

• Floating or short fixed loans often see relief first.
• Fixed loans only adjust once your current term expires and you refinance.

It’s also worth noting that banks don’t just look at the OCR when setting mortgage rates. They also factor in swap rates (the rates banks pay to borrow from each other in financial markets). Swap rates reflect market expectations about where the OCR is heading, and sometimes they move earlier than the Reserve Bank itself. That’s why mortgage rates don’t always shift in a straight line with OCR changes.

Mortgage rates also move in cycles. After years of increases to fight inflation, we’re now in a downward phase. Knowing where we are in the cycle can help you plan with more confidence.

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What the Experts Are Saying

• ANZ and ASB: Expect gradual cuts through late 2025.
• Westpac and Kiwibank: Forecasting a bigger OCR drop in the short term, possibly another 0.50% cut next month after weak GDP results.
• Most economists: Agree that the next 6–12 months will likely see rates trend down, though banks don’t always pass on the full cut straight away.

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What This Means for First-Home Buyers

For first-home buyers, falling rates can improve affordability. Lower repayments make servicing a loan easier, and some buyers who were on the sidelines may now qualify.

But there’s a flip side: as borrowing costs fall, more people re-enter the market. That demand can push property prices up again. Timing matters — and so does having your finance pre-approved.

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What This Means for Refinancers

If your fixed term is ending soon, you might be weighing whether to re-fix now or wait. Some things to think about:

• Rolling to a floating or short fixed rate can give flexibility if you expect cuts soon.
• Splitting your loan across different terms can balance certainty with opportunity.
• Early refinance may be worth exploring if the numbers work, but watch for break fees.

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Light Strategies to Consider

Here are some simple, non-technical approaches that could help:

• Stagger your fixed terms: Don’t put all your lending into one basket.
• Keep an eye on OCR review dates: Banks often adjust around these times.
• Budget with a buffer: Even if rates fall, don’t over-stretch. Extra breathing room is valuable.
• Review your mortgage early: Don’t wait until your fixed rate expires to talk to your adviser.

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The EasyStreet Approach

At EasyStreet, we’re here to help you cut through the noise. We keep an eye on the economic forecasts, but most importantly, we look at your situation and goals. Whether you’re buying your first home or reviewing your current lending, we’ll help you find the balance between certainty and opportunity.

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Thinking about your next move?
Chat with Lem or Brian about how upcoming OCR changes could affect you.

Lem Willcox – lem@easystreet.nz – 021 365 142
Brian Magellan – brian@easystreet.nz – 027 555 1083
www.easystreet.nz

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