Reserve Bank Cuts Cash Rate to Boost Borrower Confidence Ahead of Holidays

The Reserve Bank of New Zealand has announced a reduction in the official cash rate (OCR) by 25 basis points, bringing it to 2.25 percent. This decision, made on November 26, 2025, marks the lowest rate since June 2022 and aims to stimulate economic recovery as the holiday season approaches.

Mortgage expert Nathan Miglani from Squirrel, who closely monitors housing and mortgage trends, indicated that this cut was anticipated within the industry. He described the news as positive for borrowers, stating, “The OCR cut will create more momentum in the property market. This points to recovery in the market.”

While the rate cut is expected to relieve some financial pressure on borrowers, Miglani emphasized that sectors such as hospitality and retail continue to experience subdued business confidence. He noted that the full effects of an OCR reduction typically take around nine months to unfold. “Today’s OCR cut impact will be visible next year,” he explained.

As the market gains momentum in the coming months due to lower interest rates, Miglani advised borrowers to seek guidance before fixing their home loans. This caution reflects the complexities of navigating mortgage options in a dynamic financial environment.

Government Response and Market Reactions

In light of the OCR reduction, Finance Minister Nicola Willis has urged banks to transfer as much of the rate cut as possible to home loan rates. Following the Reserve Bank’s announcement, several banks began lowering their floating mortgage rates. Speaking in Auckland on Thursday, Willis expressed optimism that mortgage holders would soon feel the benefits of the lower rates. She also confirmed that the Reserve Bank would monitor how banks respond to the OCR cut.

Miglandi pointed out that competition among banks is intensifying, describing the situation as a “mortgage war.” This competitive landscape has led to attractive cashback offers for borrowers, further incentivizing them to explore their options.

Looking forward, Miglani anticipates that the property market will strengthen in 2026, which could significantly boost borrower confidence. As more favorable lending conditions emerge, potential homeowners may feel encouraged to enter the market, contributing to a more robust economic recovery.

The impact of this OCR cut appears to extend beyond immediate financial relief for borrowers, suggesting a shift towards a more vibrant housing market in the months and years ahead.