On July 9, 2025, the Reserve Bank of New Zealand (RBNZ) decided to hold the Official Cash Rate (OCR) at 3.25%, marking the end of six consecutive rate cuts that started in August last year. This move reflects the central bank’s cautious approach as it navigates a complex economic landscape.
📌 Key Highlights
- The OCR remains at 3.25%, following a series of cuts totaling 2.25 percentage points since 2024.
- Inflation has cooled to 2.5%, which is within the RBNZ’s target range.
- Despite lower inflation, the central bank is pausing further cuts to assess the impact of recent changes on the economy.
- The RBNZ is monitoring upcoming economic data, especially the second-quarter inflation figures due later this month.
📉 Why the Pause?
While inflation has been tamed, other indicators show a mixed picture:
- GDP growth in early 2025 was stronger than expected.
- Consumer spending, retail, and employment data are showing signs of slowing down.
- Some sectors like manufacturing and services are under pressure.
The RBNZ wants to avoid cutting rates too quickly, which could lead to renewed inflation or destabilize financial markets.
🏠 Impact on Homeowners
This decision directly affects mortgage holders across New Zealand:
- Floating mortgage rates are now hovering around 6.9%.
- Fixed mortgage rates are slightly lower, with 1-year and 2-year rates averaging about 5.6%.
Experts suggest that the major drop in mortgage rates is likely over. With the OCR now steady, home loan rates may remain flat in the short term. However, if inflation data later this month shows further improvement, another rate cut could come by the end of the year.
📅 What’s Next?
The RBNZ will release updated inflation data on July 21, which will strongly influence its next move. The next OCR review is scheduled for August 20. Many economists believe one more small rate cut could still happen before the end of 2025.
💬 Final Thoughts
The RBNZ’s decision to hold the OCR gives borrowers a moment of stability. With inflation cooling and interest rates flattening, now may be a good time for homeowners to consider locking in mortgage rates or reviewing their home loan strategy.
👉 What do you think? Will rates fall again this year, or is this the bottom? Let us know in the comments!
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