Reserve Bank Cuts Cash Rate to Boost Economic Recovery

The Reserve Bank of New Zealand has announced a reduction in the official cash rate (OCR) by 25 basis points, bringing it to a record low of 2.25 percent. This decision, revealed on November 26, 2025, aims to support economic recovery as the country approaches the holiday season, a crucial period for many borrowers.

Mortgage expert Nathan Miglani from Squirrel, who closely monitors housing and mortgage trends, views the cut as a positive development for borrowers. He stated, “The OCR cut will create more momentum for the property market. This points to recovery in the market.”

Despite the optimistic outlook for borrowers, Miglani cautioned that sectors such as hospitality and retail are still experiencing subdued business confidence. He noted that the full effects of an OCR cut typically take about nine months to manifest, indicating that the impact of this decision will be felt more acutely in 2026.

As the market begins to respond to the lower interest rates, Miglani advised borrowers to seek guidance before fixing their home loans. The Financial Minister, Nicola Willis, has also encouraged banks to pass along the benefits of the OCR cut to consumers. She stated that the Reserve Bank would be monitoring how financial institutions adjust their home loan rates in response to this announcement.

In the wake of the Reserve Bank’s decision, several banks have already begun reducing floating mortgage rates. Speaking in Auckland, Willis expressed hope that mortgage-holders would feel the advantages of this cut, reinforcing the government’s commitment to support economic stability.

Miglani highlighted the rising competition among banks, describing it as a “mortgage war,” which has resulted in attractive cashback offers for borrowers. This increased competition is expected to enhance borrower confidence as the property market strengthens in the coming year.

Looking ahead, the overall sentiment is cautiously optimistic. While the immediate impact of the OCR cut may not be fully realized until next year, the expectation is that lower interest rates will stimulate the property market. As borrowers navigate these changes, the emphasis remains on informed decision-making to ensure they capitalize on the opportunities presented by this shift in monetary policy.