RBNZ Cuts OCR to 2.5%: What It Means for Borrowers
On 8 October 2025, the Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate (OCR) by 50 basis points to 2.5%, its largest move in more than three years.
The decision reflects the central bank’s effort to stimulate a slowing economy and bring inflation back toward the 2% mid-point of its target range. Recent data showed a larger-than-expected GDP contraction and ongoing weakness across sectors like manufacturing and construction.
While inflation remains above target at 3.0%, the RBNZ expects it to moderate through 2026 and has signalled that further cuts remain possible if conditions don’t improve.
Financial markets responded positively, and wholesale interest rates dropped almost immediately. Banks are now beginning to trim mortgage rates, with some 1-year fixed terms as low as 4.49%.
Markets change. Confidence comes from knowing you’re prepared.
What Home Loan Customers Should Do
With rates trending lower, it’s worth taking a fresh look at your options:
- Short-term fixes (6–12 months) – These offer flexibility and the chance to benefit from any further rate reductions. Best suited to borrowers comfortable with a little risk.
- Medium-term fixes (around 2 years) – A balanced approach for those who value stability and want to lock in competitive rates if they believe we’re near the bottom.
- Split strategies – Combining fixed and floating portions can help you hedge your bets and take advantage of rate changes.
- Floating rates – Worth considering if you’re nearing a refix, giving your lender time to pass through new cuts.
Everyone’s situation is different. The right choice depends on your financial goals, comfort with risk, and timing needs, so it’s a good moment to talk to your adviser before making a move.
With rates on the move, now is an ideal time to review your lending strategy.
Schedule a meeting with a Lifetime mortgage adviser to ensure your loan remains aligned with your goals.
This article is for general information purposes only and does not constitute personalised financial advice. The content is based on information current at the time of writing and may be subject to change.
Lifetime Group Limited is a licensed Financial Advice Provider. For advice specific to your situation, please speak with a licensed financial adviser. You can view our Disclosure Statement here.
All investments involve risk and are not guaranteed. Any examples or projections are for illustration only and should not be relied on as advice.
Maximise Your Miles: Financial Tips for Frequent Flyers
Whether you’re a young Kiwi planning your OE (overseas experience), a family about to embark on that long-awaited trip to Disneyland, or a seasoned business traveller hopping between meetings in Singapore and Sydney, the excitement of travel is unbeatable. But with every adventure comes a bit of financial planning to ensure your holiday memories aren’t clouded by an unexpected hit to the wallet.
Market & Portfolio Update - January 2026
After strong gains in 2025, the global share market (represented by the MSCI World Gross Index) took a breather in January, returning 0.1% in NZ dollar terms. While the ‘Magnificent 7’ (the seven largest US-listed companies, including Google, Microsoft & Apple) have been large drivers behind the recent gains seen from the US share market, January told a different story. There appeared to be ‘catch-up’ trade where investors moved out of concentrated tech positions and into the rest of the market, with the Russell 2000 index (a widely regarded proxy for smaller US companies) having a strong month. This was generally seen as improving confidence in the broader US economy.