OCR now at 3%
Insights with Infinance by Brian Coogan
What a difference a year makes with 2.5% shaved off the OCR in 12 months since August 2024.
Since the aftermath of Covid-19 we saw the OCR peak at 5.5% in May 23 where it sat for 15 months to August 2024 while inflation and related matters settled down.
Easing seven times in 12 months when the latest Reserve Bank announcement on 20th Aug 2025 saw the OCR ease to 3% being considered the neutral rate of neither restrictive nor stimulative Monetary Policy, a significant target and milestone in the recovery journey with banks easing interest rates accordingly.
That means that once everything catches up and mortgages refix onto the new lower rates, that significant easing flows through the economy with 2.5% representing around $350 per fortnight on a $500k, 25-year mortgage.
With $135b or 41% of all fixed rate mortgages due to refix in the next 6 months, a 2.5% saving on interest rates alone puts $3.3b back into the economy with more to come.
As those incremental changes start to become meaningful, so too does the economy start to turn which is where we’re at right now … like a cruise ship slowly turning direction and as confidence builds to power away in the right direction creating demand and bringing GDP, employment and house prices with it. House prices have been slow to recover, further falling the last five months in a row with REINZ figures showing a 2.5% decrease nationally since Feb this year against everyone’s predictions.
From here, all indicators are pointing to further cuts through the year to maybe as far as 2.5% OCR taking us slightly into stimulative territory, just enough to give us the boost we need to really get going through the rest of the year and into 2026 while maintaining a steady hand at the wheel in light of geopolitical factors at play.
For more on the above go to www.infinance.co.nz/insights
Written by Brian Coogan, Licensed Financial Adviser and Director at Infinance – Taupo. Commentary is general in nature and not to be considered financial advice on its own.
What is harder than rock or softer than water? Yet soft water hollows out hard rock. Persevere. – Ovid.