OCR Reduction Brings Financial Relief To Homeowners
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- Reserve Bank’s OCR cut of 50 points triggers immediate mortgage rate reductions by banks.
- Finance Minister highlights financial relief for families and businesses across New Zealand.
- OCR reductions since August total 125 points, boosting borrowing power and easing budgets.
The Reserve Bank has reduced the official cash rate (OCR) by 50 basis points to 4.25%, marking the final adjustment for 2024. The cut is expected to prompt retail banks to lower mortgage rates and reduce returns on savings, offering relief to borrowers.
BNZ confirmed it would apply the full cut to variable home loan rates and recently reduced its six-month fixed rate to 5.99%. A BNZ spokesperson highlighted the move’s importance, saying, "Lower interest rates should help make a difference for New Zealanders."
Mortgage Supply’s Mandy Jordan described the OCR cut as a welcome development. "The OCR reduction this week has felt like an early Christmas present for many. Interest rates are already reducing after the announcement, and for people looking to borrow funds, their lending ability has likely increased. After a turbulent 2024, this signals 2025 is going to be in a much better space for anyone currently in their mortgage lending time of life."
Finance Minister Nicola Willis also welcomed the decision, emphasising its impact on household budgets. "The latest drop in the official cash rate will mean more relief for Kiwis’ backpockets," she said. She noted that the combined 125-point reduction since August has provided significant benefits. "A family with a $500,000 mortgage on a 25-year term could expect to be about $180 a fortnight better off than it was a few months ago if its rate dropped from 7% to 5.75%. This drop means many everyday Kiwis can focus more on what matters most to them, and less on making the next mortgage repayment or whether their card will decline at the supermarket."
ANZ, the country’s largest bank, announced rate adjustments, including lowering its floating home loan rate from 7.89% to 7.39% and its flexible loan rate from 8% to 7.5%. Managing director for personal banking Grant Knuckey acknowledged the challenges customers have faced, expressing hope that the reductions would offer relief as the year ends. ANZ also lowered its 18-month special to 5.59% and its Serious Saver account rate from 3.75% to 3.25%.
ASB echoed these changes, cutting variable rates by 50 basis points, benefitting more than 110,000 customers with floating loans.
Kiwibank also adjusted its floating rates and lowered its test rate from 8% to 7.5%.
These swift responses underline the significant link between the OCR and borrowing costs. With rate cuts easing budgets and boosting borrowing power, the reductions offer timely relief as the festive season approaches and signal a more stable economic outlook for 2025.