OCR dropped to 2.25% — great news for homeowners and anyone looking to buy.
The Reserve Bank of New Zealand has cut the Official Cash Rate (OCR) in its final policy review of 2025.
A fresh OCR drop signals lower borrowing costs ahead, which is encouraging news for homeowners with fixed-term mortgages coming up for renewal — and even more exciting for buyers getting ready to move into the market in the next few weeks.
What is the OCR and why does it matter?
The OCR is the headline interest-rate tool the Reserve Bank uses to steer the economy. It’s the rate banks can borrow or deposit funds overnight, and it influences the full spectrum of interest rates: mortgage rates, business lending, and savings rates.
When it moves:
Because property is such a big part of how New Zealanders borrow and invest, changes to the OCR often flow straight through to the housing market, making any shifts big news for buyers and homeowners.
The OCR through the years
In response to the pandemic (2020-2021) the OCR was slashed to a record low of 0.25%, meaning ultra-low mortgage repayment rates.
As inflation took off in 2022, the Reserve Bank raised the OCR rapidly, reaching around 5.5% — the highest level in years.
As inflation eased through 2024 and into 2025, the Reserve Bank shifted direction and began cutting the OCR again..
The takeaway? The ultra-low rates during Covid were outliers in response to an unprecedented global event. If we look at the long term, OCR levels closer to 3%-4% have been more typical. So, for buyers and homeowners today, it’s helpful to recognise we’re moving back to more “normalised” territory — and that’s reassuring.
Why this cut matters for buyers right now:
When the OCR drops, the benefits for those looking to buy (or who are refinancing) tend to stack up quickly:
Affordability improves. Even a modest reduction in mortgage rates can reduce monthly repayments.
Borrowing power increases. With lower interest costs, banks may allow larger loans (within prudent servicing tests), making a move into the market more viable.
Confidence builds. Knowing that the Reserve Bank is easing tends to bolster buyer sentiment, which can mean more activity in the market — and more choice for buyers.
As always, while lower rates are helpful, they don’t replace solid planning — checking your deposit, understanding your budget, and working with a mortgage broker or lender to make sure you’re set to make your next move.