By Fundmaster | Updated October 2025

The New Zealand mortgage market is moving fast. Following the Reserve Bank’s latest Official Cash Rate (OCR) cut to 2.50% on 8 October 2025, both major and challenger banks have started trimming fixed and floating home loan rates. For borrowers, this marks one of the most meaningful easing cycles in years — but the key question remains: how much lower can rates go?

 

The 2025 Rate Story So Far

The table below shows how the OCR, swap rates, and one-year fixed “specials” at major banks have evolved in 2025.

Date OCR Swap ANZ ASB BNZ Kiwibank Westpac
1 Jan 2025 4.25% 3.57% 5.79% 5.79% 5.79% 5.79% 5.79%
20 Feb 2025 3.75% 3.49% 5.29% 5.25% 5.57% 5.19% 5.49%
10 Apr 2025 3.50% 3.10% 5.29% 5.25% 5.29% 5.19% 5.29%
29 May 2025 3.25% 3.23% 4.99% 4.99% 4.99% 4.99% 4.95%
21 Aug 2025 3.00% 2.84% 4.79% 4.79% 4.79% 4.79% 4.75%
9 Oct 2025 2.50% 2.41% 4.49% 4.49% 4.49% 4.49% 4.49%
Net 2025 Change -1.75% -1.16% -1.30%

Key takeaways:

  • The OCR has dropped 1.75 percentage points so far this year.
  • Swap rates (which influence fixed mortgage pricing) are down 1.16 points.
  • The main banks have trimmed their one-year fixed “special” rates by around 1.30 points — but not as much as wholesale rates have fallen.

That means there’s still room for further cuts if competition heats up or funding costs keep easing.


The October 8 OCR Cut: Setting the Stage

The Reserve Bank’s 50-basis-point cut to 2.50% was larger than expected — a clear signal that the central bank believes inflation pressures are easing and that monetary support is needed for growth.

Immediately after the announcement:

  • ANZ and Westpac passed on between 30–40 basis points to floating rate borrowers.
  • BNZ had already cut its one-year fixed rate to 4.49% in late September.
  • Bank of China led the next wave of fixed-rate reductions — launching a 4.28% one-year fixed special, the lowest on the market. (Interest.co.nz)

This move intensified competition, pushing the “big five” to reassess their pricing and margins.

Why Fixed Rates Are Still Falling (Slowly)

Even after recent cuts, there’s a notable gap between fixed mortgage rates and swap rates. As of October 2025:

  • The one-year swap rate is 2.41%.
  • The average one-year fixed mortgage sits at 4.49%.

That’s a spread of about 2.1%, wider than historical averages. It gives banks room to cut further — especially if funding markets remain stable.

Challenger banks are moving first. Bank of China’s 4.28% one-year offer is already forcing larger banks to rethink pricing, while others like NBS and Kainga Ora have joined the race downward.

What Borrowers Should Consider

1. Refinancing or Renewing?

  • Stay flexible: Shorter fixed terms (6–12 months) let you capture further cuts.
  • Negotiate margins: Ask lenders to match or beat challenger offers.
  • Watch timing: Further reductions may arrive before year-end.

2. First-Home Buyers

Lower rates improve affordability, but banks remain cautious. With the OCR at 2.50%, borrowing limits may expand slightly — yet budgeting prudently is key. Use pre-approval windows to lock in rates and renegotiate if cuts continue.

3. Risk Management

  • If inflation rebounds, rate cuts could pause.
  • A blended (part fixed, part floating) strategy offers flexibility and protection.

Fundmaster’s Outlook

  • OCR could reach 2.25% by early 2026 if inflation remains soft.
  • One-year fixed rates may fall to around 4.20–4.25%, driven by competition and stable swaps.
  • Expect more cash-back offers and discounted specials as banks compete for volume.

Bottom line: The rate cycle has clearly turned. Whether you’re refinancing or buying, the coming months may offer the sweet spot for securing a lower mortgage rate — but staying informed and acting quickly will matter most.

Need Personalised Advice?

At Fundmaster, we monitor every rate move across all major and challenger banks. Our advisers can help you structure your loan to suit your goals — and make sure you’re not paying a dollar more than you should.

Contact Fundmaster Today