By Fundmaster | December 2025
If you’ve noticed that, even though the OCR has dropped, your bank’s fixed mortgage rate hasn’t budged much — you’re not imagining it. There’s real reasons for that. Let’s find a simple breakdown below:
✅ What’s happened with the OCR
- Since August 2025, the RBNZ has cut the OCR (Official Cash Rate) by a total of 100 basis points — a big drop.
- That means the “base rate” for banks — the foundation for interest rates — is now lower.
- Because you might expect that to mean fixed home-loan rates should come down a lot too. But often, they haven’t. Why?
🚧 Why fixed home-loan rates haven’t dropped much
1. Banks aren’t getting cheaper money just because the OCR fell
- The wholesale rates (what banks pay each other or on markets to get money) and other funding costs have risen or stayed high recently.
- Even though the government bond yields (a benchmark) have dropped slightly, banks don’t necessarily get those savings passed on.
2. Banks still need “real money” from depositors — and that costs them
- Many banks rely on everyday savings and term deposits from people like you. Those deposit rates haven’t dropped as fast as the OCR.
- Because they still pay decent interest to depositors, banks don’t have room (or incentive) to cut their fixed-loan rates too far.
3.Demand for mortgages is strong — that changes the math
- Lots of people are still looking for home loans. With more demand, banks don’t feel pushed to lower rates aggressively.
- Also, banks no longer get the “special pandemic-era funding support.” Now they’re funded in “real world” markets — which are more expensive.
Source: interest.co.nz+1
🎯 What this means for you (as a home-buyer or homeowner)
- If you were hoping for a big drop — don’t count on it. Fixed rates may stay mostly flat for a while.
- Floating rates or shorter-term fixed deals might still shift — if banks try to pass some of their cheaper funding onto borrowers.
- If you’re thinking about locking in a fixed rate, treat today’s rates as more “normal” than “temporary bargain.” Don’t expect them to get dramatically cheaper.
- Make decisions based on your own situation (deposit size, income, stability), not on “OMG OCR just fell!” headlines.
💡 Quick Tips for New Zealand Borrowers
- Before you lock in a fixed rate — ask: “Are banks seeing lower funding costs or not?” Just knowing the OCR went down isn’t enough.
- Consider splitting your mortgage: part fixed (for certainty), part variable/floating (for flexibility).
- Always budget conservatively — think about repayment levels as if rates go up again.
- If you can: treat any savings (from rate cuts or better loan deals) as extra repayments, not extra spending.
✅ Final Word: Stay smart — don’t assume OCR = instant rate cuts
Yes — the OCR went down a lot. But the cost for banks to lend you money depends on many other factors too. As long as funding costs, deposit costs and market conditions stay messy, fixed loan rates might lag behind.Bottom line: If you’re shopping for a home loan, or thinking about fixing your current one — look beyond the headlines. Crunch real numbers, check actual offers, and think about what’s sustainable for you over the long term.
👉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.
