The Reserve Bank of New Zealand (RBNZ) has raised the Official Cash Rate (OCR) today by 0.25% to 2.50%. For mortgage holders, a rate rise means understanding your options is more important than ever.
What does today’s decision mean?
Today’s increase confirms what the RBNZ has been signalling for some time – that inflation remains above target and further action is needed to bring it under control. While the pace of future increases may be influenced by how global conditions develop, the direction of travel will likely remain upward.
For mortgage holders, fixing your rate is one of the most effective ways to insulate yourself from further increases, giving you certainty and protecting you from what is widely expected to be a continued upward trend in the OCR over the next couple of years.
What’s changed since the May OCR review?
When the RBNZ last updated its forecasts in May, the picture looked quite different. The most significant shift since then has been the faster-than-expected easing of Middle East tensions and the reopening of the Strait of Hormuz. With shipping resuming and oil supply slowly recovering, the outlook for inflation in New Zealand has changed considerably.
The market was previously forecasting three OCR increases this year, including this one, whereas this is now projected to be two increases.
What’s happening in the property market?
The property market is showing some encouraging signs of activity. Overall sales are strong, with last month recording the highest number of June sales since 2020.
The number of homes for sale is still high with around 35,000 active listings, up 7.7% – which is good news for buyers who have been waiting for more choice. Property prices, however, are unlikely to increase significantly until active listings fall closer to 25,000.
The standout trend remains that well-priced, well-presented properties are selling. If you’re buying, quality stock doesn’t hang around. If you’re selling, pricing and presentation matter more than ever.
What should you be thinking about if you have a mortgage?
If you’re on a floating rate
Today’s OCR increase will likely flow through to floating rates relatively quickly – most banks move their floating rates in line with OCR changes. If you’re on a floating rate, you will likely be looking at higher repayments very soon.
The question is whether staying floating still makes sense for your situation. For some, the flexibility is worth it – floating allows lump sum payments and restructuring without break costs. But for others, locking in some certainty is becoming increasingly important as the rate environment shifts. This is a conversation worth having now, before rates move again. Get in touch and we can work out what makes sense for you.
If your fixed term is expiring soon
Today’s rise means acting sooner rather than later is even more important. Most lenders will allow you to lock in a new rate up to 60 days before your fixed term ends – and with further increases predicted, the longer you wait the more likely you’ll be refixing into a higher rate environment.
Here are a few things worth thinking about:
How long should you fix for? A longer term locks in today’s rate and protects you if rates keep climbing — but could leave you paying more than necessary if they ease sooner than expected. A shorter term keeps you flexible but more exposed to future rate rises – the right answer depends on your situation.
Should you split across multiple terms? Splitting your mortgage across two or three different fixed rate terms spreads your risk, so you’re not fully exposed to the rate environment at any single point in time.
Is your current lender still your best option? It’s always worth comparing what’s available. Some banks offer cash-back incentives worth thousands of dollars to win your business – the best deal isn’t always with your current lender.
Your refix is also a natural moment to review your broader loan structure – your loan term, repayment levels, and whether features like revolving credit could be working harder for you. An Enva Mortgage Adviser can help you work through all of this before your term expires.
Still a way to go on your current fixed rate?
If you’re mid-term, your repayments are protected until your term expires – so today’s rise doesn’t change what you’re paying right now. But with rates likely to be higher still when you come to refix, getting ahead of that conversation now puts you in a stronger position.
It’s also worth exploring whether breaking your current fix makes sense. Today’s rate rise may actually make this more compelling – break costs can sometimes be offset by locking in your next term before rates climb further, and with current cash-back offers of up to 1.25% of the total loan value, the numbers may stack up better than you’d expect. An Enva Mortgage Adviser can run the numbers with you so you can make an informed decision.
If you’re in the process of buying your first home
A rate rise adds a new layer of consideration for first home buyers – but it doesn’t need to be a reason to pause. The most important thing you can do right now is get clarity on your numbers – what you can borrow, what repayments would look like at current rates, and what strategies you can put in place to protect yourself if rates rise further. Having that picture in front of you means you’re ready to move with confidence when the right property comes along.
Buying your first home can feel overwhelming, but it doesn’t need to. We work with first home buyers through every step of the process – and our first home buyer email series is a great place to start. Sign up here to get practical guidance and tips delivered straight to your inbox.
Want to discuss your options?
Whether you’re floating, approaching a refix, considering breaking your current term, or looking to take advantage of bank cash contribution offers – an Enva Mortgage Adviser can help you make sense of what today’s rise means for your specific situation – get in touch with us today.
This article is intended as general information only and does not constitute financial advice. Please speak with an Enva Mortgage Adviser for advice tailored to your personal circumstances.
