The Reserve Bank has cut the official cash rate by 25 basis points to 3.25%.
Today’s OCR decision is the third of 2025, and the first since the 2025 Budget was released.
The new rate is the lowest since October 2022.
The announcement comes amid turbulent global market conditions, which followed US President Donald Trump’s back and forth on sweeping global tariffs.
The cut had been widely expected by economists. BNZ lowered all mortgage rates yesterday in anticipation of the move.
Westpac has also since lowered its home loan interest rates.
Its six-month fixed special rate was lowered to 5.49%, and its three-year rate was lowered to 4.95%. The special fixed rate for one year, 18 months and two years were each lowered to 4.95%.
Westpac’s standard six-month fixed home loan rate was lowered to 6.09%. Its one year, 18-month, two-year and three-year standard fixed rates were each lowered to 5.55%.
ANZ’s floating home loan was adjusted to 6.49%. Its flexible home loan was lowered to 6.60%, and its business flexible facility rate was lowered to 6.49%.
Meanwhile, ASB lowered its housing variable home loan to 6.44%. Its orbit variable rate was lowered to 6.54% and its back my build rate was lowered to 3.99%.
In a statement today, the Reserve Bank said the economy was starting to recover, after contracting in the middle of last year.
Finance Minister Nicola Willis said the OCR has now fallen 2.25% in the last nine months.
She also noted the Reserve Bank’s statement that about half of mortgages will be refixed after June this year, meaning some homeowners will feel the impact of a lowered OCR.
“That’s good news for them, but also good news for our local businesses, because when people have more money in the household budget, they’re more likely to spend it at local shops, local cafes, and we look forward to that helping the economic recovery on its way.”
She said some first home buyers could also benefit, as more people could afford a mortgage with a lower interest rate.
Reserve Bank discussed holding OCR
The new rate is the lowest since October 2022. (Source: 1News)
In a statement released today, the Reserve Bank said it discussed holding the OCR at its previous rate of 3.5%.
It said some members noted it would allow the committee to “better assess” whether increased economic policy uncertainty was having an impact on household and firm behaviour.
“An unchanged OCR could also further consolidate inflation expectations around the target mid-point, and guard against the risk of higher-than expected inflation from the supply-side effects of increased tariffs.”
Arguments for lowering it were that inflation was within target range, there was significant spare capacity in the economy, measures of core inflation and wage inflation have continued to decline, and there was weaker outlook for domestic activity and inflationary pressure due to international developments.
The committee then voted on the decision, and was in favour of lowering the OCR by five votes to one.
“Inflation is within the target band, and the Committee is well placed to respond to both domestic and international developments to maintain price stability over the medium term.”
Tariff impact considered
The Reserve Bank also considered potential outcomes of heightened US tariffs.
It said higher US tariffs would lower global demand for New Zealand exports, “particularly from Asia”.
In turn, it said this would constrain domestic growth.
“Heightened global policy uncertainty is expected to weigh on business investment and consumption in New Zealand.
“On balance, the Committee expects the increase in global tariffs to result in less inflationary pressure in the New Zealand economy.”
However, the Reserve Bank said there was uncertainty about this assessment, “depending on whether the impact of tariffs proves to be predominantly demand- or supply-side in nature”.
“The domestic monetary policy response will focus on the medium-term implications for inflation.”
Housing market analysis
Kelvin Davidson, the chief property economist at Cotality NZ – formerly CoreLogic – said “nothing much really changes” for the housing market in wake of today’s decision.
“Some banks were already trimming mortgage rates a little in advance of the decision, and although another renewed bout of competition is always possible, the largest rate falls may well be behind us.
“For the record, the RBNZ’s prediction for our Cotality Home Value Index is an increase of 3.5% this calendar year before a rise of 4.8% in 2026.
“We agree with that indication for a ‘subdued upturn’ in 2025. The lagged effects of the mortgage rate falls already seen will be an upwards influence, but the slow economic recovery and the lurking impact of debt to income restrictions are some of the factors likely to act in the other direction.”
