The surprising impact of an OCR cut on your mortgage
From Aaron’s YouTube: “Cutting the OCR is "the wrong thing to do" #newzealand #firsthome #kiwisaver ##nzfirsthome”
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Posted 6 April 2025
The short version
- The OCR has been cut, but some economists believe this was the wrong move.
- Despite economist opinions, Aaron predicts a 0.25% cut is likely.
- Mortgage rates don't always follow OCR movements immediately.
- Banks set their rates based on more than just the OCR.
Why economists and banks don't always agree
When the Reserve Bank moves the OCR, economists often weigh in with different opinions. As Aaron notes in this video, one bank economist argued that cutting the OCR was 'the wrong thing to do'. However, as a mortgage adviser working directly with banks daily, Aaron still predicted the quarter-point cut would happen.
This shows that while economists provide valuable analysis, their assessments don't always match what happens in the real world of mortgage lending. Banks make decisions based on funding costs, competition, and their own risk assessments - not just economic theory.
What OCR changes actually mean for homeowners
The OCR influences but doesn't directly control mortgage rates. While Aaron expected the 0.25% cut, he didn't suggest this would automatically mean lower mortgage rates right away. Banks may wait to see how wholesale funding markets react before adjusting their rates.
For borrowers, this means you shouldn't panic if you don't see fixed rates drop immediately after an OCR change. The wholesale money markets that banks borrow from move at their own pace. Your best move is to consult an adviser who tracks these movements daily.
When to expect mortgage rate changes
As Aaron mentions, the OCR decision was coming later in the week when he recorded this. This timing highlights how mortgage advisers anticipate these announcements to best serve their clients. They watch not just the OCR decision, but also bank economists' forecasts and market reactions.
If you're coming up to refix your mortgage, this is why timing matters. Rates can change based on OCR announcements, but also between announcements based on bank funding costs. An adviser can help you navigate these moving parts rather than trying to time the market yourself.
This is general information, not personalised financial advice. For advice on your situation, talk to Aaron.
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