It’s the Reserve Bank’s first official cash rate (OCR) decision of 2025, and you betcha, it’s likely to be another cut, writes 1News Business Correspondent Katie Bradford.
Homeowners – or those dreaming of owning their own slice of Kiwi land – are yet again looking to the central bank’s big call at 2pm tomorrow.
In fact, you could almost bet the house, or that eye-watering mortgage, on it being another cut of 50 basis points or 0.5%. That would take the rate from 4.25% to 3.75%.
It’s pretty much a done deal, three months in the waiting.
Reserve Bank governor Adrian Orr made it clear in November that if the economic conditions persisted, the Monetary Policy Committee would be looking to cut again.
There is a slight chance the committee looks at the dire economic situation – rising unemployment, businesses failing, mills closing, Kiwis leaving the country in droves – and decides to throw everything at it and make a 0.75% cut.
However, the data always lags, and the impact of these decisions takes some time to flow through the economy.
So steady as she goes, a 50-point cut is far more likely. We’ll also hear from Orr, and those inclined can pore over a plethora of economic forecasts.
What this OCR call means for you
It’s not quite a mortgage war. Yet.
But banks have been dropping rates as interest in new loans heats up.
As rates started falling last year, many mortgage holders started moving to shorter-term six-month fixed rates.
That means many of those people are coming off those rates this year.
Most six-month rates are now below 6% — a full point lower than they were a year ago.
Some are even floating while they wait and hope for the best deal. In this economy, every cent counts.
For savers, the news isn’t so good. Term deposit rates have been gradually slipping as banks adjust their rates downwards for borrowing.
What’s next for interest rates?
After a couple of years of nervously looking at how high rates can go – the big question now is: How low will they go?
All eyes are now on how fast the Reserve Bank drops rates to what it calls a “neutral” level, around 3%. Economists are urging the bank to get there fast.
“We argue the case not to muck around. Cut to 3%, a neutral setting, and be on the watch to move into stimulatory territory if the trade wars bite us. Get to neutral and get the economy moving,” the KiwiEconomics team from Kiwibank says.
For many, that can’t come fast enough.
