OCR at 3.75% … no surprises there.

Written By Kim Manunui

Now the Official Cash Rate ( OCR ) is dialled back 0.5% on 19th Feb to 3.75% as expected, where do we go from here.

3 things -

  1. Most banks anticipated the decrease earlier ahead in the month and reduced their fixed rates by varying amounts with same reduced as much as 0.5%

  2. Then once announced, they reduced their floating rates by 0.5% in line with the OCR and kept their fixed rates the same as recently reduced

  3. With the next OCR announcement due Wed 9th April, from here it’s a matter of reading the economy and deciding if they should stay where they are or announce more competitive easing, these will be minor tweaks if at all.

As we’ve previously stated, we’ve taken the bigger steps to come off those higher rates previously and at 0.5% this is likely the last large cut in the process of getting to terminal rate of 3.25% to 3% by the end of the year.

Key factors are –

  • Inflation is back under control and settled in the 1% -3% target range being near the 2% mind point

  • Net immigration eased

  • Economic growth beginning to pick up

  • Unemployment is at its peak and expected to decrease as the economy picks up

  • Geopolitical factors especially around tariffs could have a bumpy ride effect on inflation and OCR decisions between now and the end of the year

This poses the question re how long to refix the mortgage for when it falls due which can be assessed on a case by case basis and depends on which bank, most are still opting for the short or mid term rates of 6 month to 1 year while rates continue to rally with some banks started to announced fixed rates under 5% at 4.99% on their 2 year rates … which in a year’s time could potentially be consider high.

Given the last OCR announcement for the year is in Nov and the first for 2026 in Feb which gives that bit more time for things to settle down, no doubt the Reserve Bank will be looking to have everything nicely put to bed and tucked in for the year ahead by Nov so depending on the economic climate at the time will determine if we do go that last step to 3.0% OCR by the end of the year or hold off until the following Feb and see what happens then … remains to be seen and lots could happen in the meantime

Click here to visit the Reserve Bank website for more on the OCR announcement.

Kim Manunui

Hi, I’m Kim and I work with a great team to help individuals, as well as small and not so small businesses get their message, product and services to the world using digital media and creating wonderful websites that don’t cost the earth.

I was born in Canada, and grew up around Vancouver and the mountains of British Columbia. My love of pristine environments led me to New Zealand and eventually to the mountains, lakes and rivers of the central North Island which is home. My family’s heritage is here, and it’s from here that Korio traverses the planet.

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