- The Reserve Bank cut the OCR to 3.25% and signalled more cuts by year-end.
- Jarrod Kerr predicts the OCR could drop to 2.5%, leading to lower interest rates.
- Kelly Eckhold expects the OCR to hold at 3%, with minimal impact on long-term rates.
Two of the country’s leading bank economists are divided on just how far interest rates will fall, with one predicting an Official Cash Rate of 2.5%.
Start your property search
The Reserve Bank of New Zealand cut the OCR from 3.5% to 3.25% on Wednesday and indicated at least one more cut, if not two, by the end of the year.
KiwiBank chief economist Jarrod Kerr welcomed the move and said the RBNZ's revised forecast would drive down interest rates.
This week, BNZ dropped its one-year rate from 4.99% to 4.95%, but Kerr expects further discounts in fixed rates.
“If there are more cuts coming, then I think all those rates will continue to fall.
“Will the Reserve Bank go below 3%? Based on the updated forecast and the analysis of what’s happening at the moment, they can. They’ve cut, they are going to cut again, and it looks like they will cut again after that.”
Discover more:
- OneRoof House Price Report - June 2025
- 'Heartbroken and traumatised': Retirees to sell at a loss after landslide damages their cottage
- Execs selling their neighbouring Remuera mansions
Kerr said the situation appeared to be very fluid, with uncertainty in the global economy a major factor.
Last week, Kerr called on the Reserve Bank to stop mucking around and cut the OCR this week by 50 basis points.
“We think they will ultimately move down to 2.5%, which is just one more cut beyond what they are saying now,” he told OneRoof after today's cut.
Westpac chief economist Kelly Eckhold thinks the Reserve Bank will hold the OCR at 3% this year. “I still have a fair degree of confidence that that’s probably right." He said the second predicted cut may not happen until mid-2026.
Eckhold said the cuts to the OCR would impact floating rates, but expected them to have little or no impact to the longer-term rates. “You sort of see the fixed mortgage rates sitting in the 4.95% range at the moment. That’s probably reasonably where they will be for the foreseeable future, absent of changes in global interest rates or news that things are souring a little bit in New Zealand.”
KiwiBank chief economist Jarrod Kerr says the Reserve Bank will cut and cut again. Photo / Supplied
Kelvin Davidson, chief property economist at Cotality, formerly CoreLogic, agreed that it was not a foregone conclusion that the OCR would continue to fall consistently or consecutively.
“Similarly, the published OCR track has a trough of around 2.8-2.9% (quarterly average) late this year or early next, which implies perhaps two more rate cuts in this cycle, but not necessarily every meeting.”
Davidson said some banks had already reduced their home loan rates “a little” ahead of today’s announcement, so did not rule out the biggest cuts having already happened.
Ray White chief economist Nerida Conisbee said banks typically passed on any cuts to the OCR within weeks, which provided cheaper home loans and reduced monthly payments for borrowers.
“With the national median house price holding steady at $790,000 and available listings up 10.9% to 36,870 properties, lower borrowing costs should improve buyer activity, particularly supporting first-home purchasers.”
- Click here to find properties for sale
