Banks move fast to pass on OCR cuts
New Zealand’s major banks have moved swiftly to pass on the Reserve Bank’s final OCR cut of 2025, trimming floating and flexible mortgage rates across the board. But while borrowers will see immediate relief on variable rates, economists warn that fixed-rate declines may be nearing their floor.
The Reserve Bank cut the OCR by 25bps to 2.25%, signalling only limited room for further easing. The central bank forecasts a low of 2.2%, with increases expected from 2028 – a sign the rate-cutting cycle may now be nearing its end.
Floating rates fall as BNZ, ASB, Kiwibank, and ANZ all move
Major banks announced reductions within hours of Wednesday’s OCR decision, delivering cuts of between 15 and 20 basis points across their floating and flexible products, 1News reported.
BNZ will lower its variable home lending rates by 15bps from 3 December, dropping its standard variable rate from 5.99% to 5.84%. Rapid Repay, TotalMoney, and Mortgage One rates will all fall from 6.09% to 5.94%.
ASB is trimming a broader range of floating products, cutting its housing variable rate by 20bps to 5.79%, reducing its Orbit rate to 5.89%, and lowering its Back My Build rate from 3.54% to 3.34%. The changes take effect within four business days of the OCR announcement.
Kiwibank is reducing its term loan variable and offset variable rates from 5.8% to 5.65%, and its revolving loan rate from 5.85% to 5.7% – a 15bps cut.
ANZ is reducing its floating home loan rate from 5.89% to 5.69%, while its flexible home loan rate will fall from 6% to 5.8%. Most changes take effect from Friday.
Economists warn fixed rates may not fall much further
While floating-rate borrowers will benefit immediately, economists caution that fixed mortgage rates might be close to bottoming out, RNZ reported.
Kiwibank chief economist Jarrod Kerr (pictured left) noted swap rates “rose by a little more than 5bps” after the announcement – suggesting markets believe the central bank is close to done with cuts.
Market expectations had already priced in the full 25bps reduction and a trough around 2.15%, limiting further downward pressure. One-year swap rates have fallen significantly since August but remain sensitive to global risk sentiment.
Infometrics chief forecaster Gareth Kiernan (pictured center) said large lenders could still face short-term competition from SBS and Bank of China, offering one-year rates at 3.99% and 4.28% respectively, versus major banks at 4.49%.
However, Kiernan warned: “there's little likelihood of wholesale rates heading much lower unless we get a bad run of economic data or the market's AI bull run suddenly ends.”
He added: “I don't think there's a massive hurry to rush out and lock in a fixed rate – it's probably not until mid-2026 that any upward trend might start to emerge in most of the retail rates.”
BNZ: Mortgage rate cycle near its floor
BNZ chief economist Mike Jones (pictured right) said the cut was already “more than 100 percent priced in” and the statement marked “more of a shift towards a neutral bias".
“We probably thought it was on its last, or that downtrend was on its last legs anyway,” Jones said.
He said wholesale rates had “jumped up a bit", reducing the scope for further cuts, though this may not persist depending on global trends.
Jones expects more debate around longer-term fixes: “I think we are going to see more of a debate from here about fixing terms and whether it's time to push out the average term of borrowing a bit further into the future.”
ANZ: borrowers may benefit from longer terms
ANZ economist David Croy reiterated that the low point in the mortgage rate cycle is close, saying the bank has “for some time been of the view that the low point in the mortgage rate cycle was approaching” and borrowers may benefit from locking in longer-term rates, RNZ reported.
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