What is the OCR?
The Official Cash Rate (OCR) is the interest rate set by the Reserve Bank of New Zealand (RBNZ). It's the rate at which commercial banks borrow from and lend to the RBNZ overnight. The OCR is the RBNZ's primary tool for managing inflation and economic activity.
How the OCR flows through to mortgage rates
When the RBNZ changes the OCR, it affects the cost of money for banks. This flows through to mortgage rates, though not always immediately or in equal measure:
Floating rates
Floating mortgage rates closely track the OCR. When the RBNZ cuts the OCR by 0.25%, floating rates typically drop by a similar amount within days or weeks.
Fixed rates
Fixed rates are more influenced by wholesale swap rates — the rates at which banks borrow money for fixed terms on financial markets. Swap rates are forward-looking and factor in expected OCR changes, so fixed rates often move before the OCR actually changes.
Why banks don't always pass on OCR cuts fully
You might notice that when the OCR drops by 0.50%, your bank only cuts rates by 0.25%. This happens because:
- Funding costs — banks also borrow from international markets, not just the RBNZ
- Credit risk margins — the gap banks need to cover defaults and risk
- Profit margins — banks have shareholders and costs to cover
- Competition — if other banks don't cut as much, there's less pressure to cut fully
What happens when the OCR rises?
Rising OCR means higher borrowing costs. Banks typically pass on increases faster than cuts. If you're on a floating rate, your repayments increase. If you're on a fixed rate, you're protected until your term expires — then you'll refix at whatever rate is current.
What should you do?
- If the OCR is falling: Consider shorter fixed terms or floating to benefit from further cuts
- If the OCR is rising: Lock in a longer fixed term for protection
- Always compare: Compare rates across lenders — banks respond differently to OCR changes
Use the mortgage calculator to see how different rate scenarios affect your repayments.
Frequently asked questions
What is the official cash rate (OCR) and how does it affect my mortgage?
The OCR (Official Cash Rate) is the interest rate the Reserve Bank of New Zealand sets to manage inflation and economic growth. It directly influences floating mortgage rates; when the OCR rises, floating rates typically rise within weeks. Fixed rates are influenced by market expectations of future OCR moves, not the current rate.
How quickly do mortgage rates change after the OCR changes?
Floating rates typically adjust within 1–4 weeks of an OCR change (most commonly at the next monthly review date). Fixed rates respond more slowly and unpredictably, as they're based on market expectations. A rising OCR outlook may push fixed rates higher even before an OCR announcement.
Will my fixed-rate mortgage be affected by OCR changes?
No, not directly. Your fixed rate is locked and won't change until the term expires, regardless of OCR moves. However, when your fixed term ends and you refinance, the new rate will reflect current OCR levels and market conditions at that time.
What should I do if the OCR is rising and I'm on a floating rate?
If OCR is rising, consider fixing your rate to lock in certainty before rates climb further. If you're already on a floating rate, you may face higher repayments as the OCR increases. Use our calculator to estimate your payments under a higher rate scenario.
Is it a good time to fix my mortgage when the OCR is high?
When the OCR is high, fixed rates are also high. However, if you believe rates will rise further, locking in now avoids bigger increases later. If you expect the OCR to fall soon (based on economic forecasts), floating may be cheaper. Monitor Reserve Bank announcements and consult a mortgage broker for timing advice.
See how the latest OCR decision affects rates
Compare current mortgage rates from all NZ lenders — updated daily so you can see exactly how banks have responded to OCR changes.