What the OCR drop means for you

The Reserve Bank recently lowered the Official Cash Rate (OCR) from 3.25% to 3.00%. The OCR is the benchmark interest rate that influences how much banks charge for loans and how much they pay on savings.

Why did it change?

The Reserve Bank made this move to support the economy, with signs of slower growth both in New Zealand and overseas. A lower OCR generally makes borrowing cheaper and encourages spending and investment.

What does it mean for borrowers?

• Business lending: Cheaper access to credit may provide an opportunity to invest in growth or manage cashflow more effectively.

• Home loans: Many banks have already reduced some of their fixed and floating mortgage rates. If you’re on a floating rate, you may notice changes soon. If you’re on a fixed term, your rate won’t change until your loan rolls over.

What about savers?

The flip side of lower borrowing costs is that deposit and savings rates may also fall. Banks have started trimming the interest they pay on savings accounts and term deposits, so returns could be a little lower.

What happens next?

No one can say for sure. While markets expect the Reserve Bank may cut the OCR further, that depends on how the economy performs. For now, it’s a good time to:

• Review your loan structure when your fixed terms come up for renewal

• Reassess your cashflow and investment plans

• Keep an eye on your savings and term deposit rates

Need advice?

If you’d like to talk through what these changes might mean for your business or personal finances, please get in touch. We’re here to help you navigate the shifts with confidence.