NZ Mortgage Rates 2025: What the 3.25% OCR Hold Means for Property Investors
- Staircase Financial
- Jul 9
- 3 min read
Updated: Jul 26
What the Latest OCR Hold Signals
Today the Reserve Bank of New Zealand (RBNZ) confirmed it will hold the Official Cash Rate (OCR) at 3.25%. This is the first decision to keep the OCR on hold following a series of six cuts between mid 2024 and early 2025 from the elevated rate of 5.5% to its current level of 3.25%. While the decision was widely expected, it marks a key inflection point in New Zealand’s mortgage rate cycle.
This case study reviews the historical context of New Zealand’s mortgage rate trends and examines what today’s OCR hold implies for investors and borrowers going forward.
Historical Context: NZ Mortgage Rates Since 1980
New Zealand has undergone several mortgage rate cycles over the past four decades, shaped by inflation trends, economic reforms, and global financial conditions:
1980’s: Mortgage interest rates exceeded 20% as the country grappled with extreme double digit inflation, wage freezes, and monetary instability. The mid 1980’s saw extreme volatility as New Zealand transitioned away from a heavily regulated financial system.
1990’s: The introduction of inflation targeting by RBNZ led to a steady decline in interest rates. Mortgage rates moved into the 8–10% range and remained elevated compared to international peers, reflecting NZ’s small economy risk premium and developing capital markets.
2000’s: Fixed mortgage rates fluctuated between 7% and 9% prior to the Global Financial Crisis (GFC). The GFC prompted aggressive monetary easing, pushing mortgage rates sharply downward.
2010s: A period of monetary stability and subdued inflation saw mortgage rates settle in the 4% to 6% range. This decade established a new benchmark for “normal” borrowing costs in New Zealand.
2020–2021: In response to the COVID pandemic, RBNZ slashed the OCR to emergency levels, driving 2 year fixed mortgage rates below 3%. These were the lowest residential mortgage rates in modern NZ history.
2022–2023: Surging inflation triggered the most aggressive tightening cycle in decades. The OCR rose from 0.25% to over 5%, and 2 year fixed mortgage rates peaked above 7.5% in mid 2023.
2024–2025: As inflation cooled and GDP growth slowed, RBNZ began a gradual easing cycle. By Q2 2025, the OCR had been reduced to 3.25%. The average 2-year fixed mortgage rate has since declined to approximately 4.95%, marking a return to a more sustainable cost of borrowing.
What the 3.25% OCR Hold Signals
The RBNZ's decision to hold the OCR reflects confidence that prior cuts are influencing the economy. Inflation is trending within the target band, and both household spending and business activity have moderated.
From a mortgage market perspective, the OCR hold suggests a stabilisation phase. Borrowers refinancing from 6.5–7.5% fixed rates now benefit from the current average of 4.95%, offering meaningful relief. However, a return to sub-3% rates remains unlikely unless triggered by another major economic shock.
Timing Property Investment in 2025
Historically, falling mortgage rates tend to precede renewed momentum in the housing market. However, such recoveries often lag due to shifts in market sentiment and affordability.
With OCR stabilising, investors can anticipate a more predictable borrowing environment. Some economists forecast further OCR reductions, potentially reaching 2.5% - though this is not guaranteed.
The current conditions offer a favourable window for long-term property investors, particularly those leveraging existing equity. Lower borrowing costs improve cash flow and increase purchasing power.
Conclusion
The 2025 interest rate environment marks the end of a significant tightening phase and the onset of a neutral monetary stance. At 3.25%, the OCR neither stimulates nor restricts the economy, aligning closely with the RBNZ's inflation and employment mandates.
Understanding past mortgage rate cycles helps investors identify turning points in the property market. With 2-year fixed rates trending around 5%, market conditions resemble early recovery stages. Investors who move early in such phases often position themselves for stronger capital gains in subsequent years.
Take the Next Step
Want to make informed moves in today’s evolving property market? Book a free strategy session with the experts at Staircase. Our team will help you understand how current mortgage trends align with your property investment goals and show you how to leverage today’s rates to build long-term wealth.
