Source: New Zealand Parliament – Hansard
Question No. 2—Finance
2. TIM VAN DE MOLEN (National—Waikato) to the Minister of Finance: What recent reports has she seen on interest rates?
Hon NICOLA WILLIS (Minister of Finance): As I said yesterday, the Reserve Bank’s monetary policy committee last week cut the official cash rate (OCR) by 25 basis points to 5.25 percent. Reductions in the official cash rate and expectations about its future path affect both short-term and longer-term market interest rates. These include mortgage and business lending rates, which have a direct impact on New Zealand families and businesses. And through interest rates, the exchange rate, and a number of other channels, a reduction in the OCR provides a boost to the economy, which is positive for all New Zealanders. That’s why last week’s cut was a significant turning point for the economy.
Tim van de Molen: What is the expectation for future OCR cuts?
Hon NICOLA WILLIS: In last week’s Monetary Policy Statement, the Reserve Bank issued its own forecast for the future path of the official cash rate. This shows steady reductions from the current rate of 5.25 percent to a 3 percent OCR by mid-2027. The financial markets are more forward leaning than this. Currently, the market is pricing in a faster pace of interest rate cuts and expecting that the OCR will reach 3 percent in February 2026.
Tim van de Molen: How have banks responded to the OCR cut?
Hon NICOLA WILLIS: Well, I’m advised that all major banks have cut their mortgage rates following last week’s Monetary Policy Statement. In some cases, that will take time to flow through to people’s mortgage payments, depending on whether and for how long they have fixed their mortgages. In other cases, it will flow through straight away. In any event, Kiwis can look forward to paying less interest on their mortgages and on their personal loans, and together with tax relief, which came in on 31 July, this will be a big help with the cost of living for New Zealand families.
Tim van de Molen: How do lower interest rates affect people’s mortgage repayments?
Hon NICOLA WILLIS: Individual circumstances vary a lot, and if people are interested in how things could change for them, I’d recommend they look at a reputable mortgage calculator, like that on the Sorted.org.nz website. But to give one example, a drop from a 7 percent mortgage rate to 6 percent for a family with a 25-year $500,000 mortgage means their repayments would reduce by $145 a fortnight. They, of course, could use that money elsewhere in the family budget or simply pay their mortgage down faster. Either way, they are significantly better off.
