In it's May 28, update the Reserve Bank of New Zealand (RBNZ) announced a 25 point reduction to the Official Cash Rate (OCR), which now sits at 3.25 percent. This move, which was widely anticipated by economists and the financial markets, signals the central bank’s ongoing commitment to supporting a sluggish economy and keeping inflation in check.
Ahead of the OCR cut and over the following days, major lenders have lowered their fixed and variable mortgage rates. However, it’s important to note that much of this OCR cut was already factored into the market. For many borrowers, the most attractive offers are now found in the short-term fixed space, as lenders compete for new and refixing customers and we expect that any further reductions to mortgage rates are likely to be incremental, especially for terms beyond two years.
Here’s a snapshot of the latest negotiated rates* our advisers are seeing:
* Please note these figures represent negotiated rates our advisers have secured on behalf of clients and may differ from advertised rates.
While today’s cut is positive news for borrowers, the general consensus is that the era of rapidly falling mortgage rates is behind us. The RBNZ once again signalled that it may continue to ease the OCR over the coming months, but with global economic uncertainty and funding costs still elevated, the impact on home loan rates is likely to be more subdued from here.
Short-term rates could edge down a little further, but those looking at three years or more should not expect much movement unless there’s a major shift in international markets.
If your fixed rate is due to expire soon: Consider rolling onto a short-term fixed rate (6-12 months). This keeps your options open and will let you take advantage of any further rate drops.
For investors: The current two-to-three year fixed rates are worth considering for rental lending, offering a good mix of certainty and flexibility in a changing market, however we would recommend also spreading the risk by splitting lending to also take advantage of the 6-12-month specials currently being offered. .
Thinking long-term: If you value stability, fixing for three years or longer is still an option as we don’t expect rates in this bracket to fall much further – and there is the potential that these terms may start to rise again depending on the impact of global markets. For those seeking long-term stability, now may be the time to lock it in (especially as we have seen three-year rates drop over the past few days).
Refinancing Opportunities
With rates falling, now is an ideal time to review your mortgage structure. Refinancing to a lower rate or a more flexible loan can yield significant savings. It is also worth noting that high-income and stable borrowers are often attractive to lenders, which can translate into sharper rates or cash incentives to switch banks.
Negotiating with Lenders
Don’t accept advertised rates as final. Our team will negotiate hard on your behalf – lenders are competing hard for quality clients in the current market and we will use your income stability, credit history, and existing relationship with your bank as leverage.
Optimising Loan Structures
Our advisers will help you consider what loan structure will be optimal for you. While we are still currently favouring shorter fixed terms due to expected cuts to the OCR throughout the remainder of the year, we will also help you consider whether splitting your mortgage across different terms will help manage risk and avoid rolling all your lending onto a higher rate at once. For those with investment properties, interest-only periods may be available, freeing up cashflow for other investments.
Consider Building a Portfolio
With relaxed investor rules and falling interest rates, we can also help advise you on whether now is the time to diversify into additional properties or restructure existing debt for tax efficiency. Property remains one of the most effective ways to accumulate long-term wealth in New Zealand. Through leveraging equity in your current home or property portfolio, it is possible to expand your portfolio with relatively small upfront equity to amplify potential returns. Additionally, rental properties generate ongoing cash flow, which can help service debt and provide passive income.
Every borrower’s situation is unique. Whether you’re looking to refix, refinance, or simply want to review your mortgage structure, our advisers can help you navigate the current environment and plan ahead with confidence.
This month, if you book a free mortgage, insurance or KiwiSaver review, you will also go into the draw to win a month’s mortgage repayments on us, up to the value of $5,000. To book your free consultation, click here.
The next OCR update will take place at 2.00pm on July 09, 2025.
The content of this article should not be taken as financial advice, or a recommendation of any financial product. These insights are based on current economic commentary, market pricing for interest rates, and our personal opinion. Threefold is not liable or responsible for any information, omissions, or errors present.
