The Reserve Bank of New Zealand (RBNZ) sets the Official Cash Rate (OCR) seven times a year. Every time the OCR changes, NZ media reports on what it means for mortgage holders. But the relationship between the OCR and your mortgage rate is more nuanced than it first appears — especially for fixed-rate borrowers.
The RBNZ's Official Cash Rate (OCR) directly drives NZ floating mortgage rates but has only an indirect effect on fixed rates. Fixed rates are priced off wholesale swap rates — which already reflect market expectations about future OCR levels. This is why fixed rates often move weeks or months before the OCR actually changes.
What Is the OCR?
The OCR is the rate at which commercial banks borrow and lend overnight funds to each other. It’s the RBNZ’s primary tool for managing inflation and economic activity.
- When the RBNZ raises the OCR: borrowing becomes more expensive → spending slows → inflation reduces
- When the RBNZ cuts the OCR: borrowing becomes cheaper → spending increases → economy stimulated
The OCR is set by the RBNZ’s Monetary Policy Committee, which meets seven times a year. Rate decisions are announced at scheduled Monetary Policy Review (MPR) and Monetary Policy Statement (MPS) meetings.
OCR History 2020–2026
| Period | OCR movement | Context |
|---|---|---|
| March 2020 | Slashed to 0.25% | COVID-19 response |
| August 2021 | Began hiking cycle | Inflation rising sharply |
| May 2023 | Peaked at 5.50% | 14-year high |
| August 2024 | First cut: 5.25% | Inflation back near 2% target |
| Late 2024–early 2025 | Series of cuts | Economy weakening |
| 2025–2026 | Settled ~3.25%–3.75% | Inflation stable, cautious easing |
How the OCR Affects Floating Rates
The link between the OCR and floating mortgage rates is direct and fast. Banks set their floating (variable) rates as a margin above the OCR. When the RBNZ cuts the OCR by 0.25%, floating rates typically fall by a similar amount within days.
Typical floating rate = OCR + bank margin (currently ~3.0%–3.5%)
At an OCR of 3.50%, floating rates are typically in the range of 6.5%–7.0%.
This direct link is why floating-rate borrowers benefit immediately from OCR cuts — but also feel OCR hikes immediately.
How the OCR Affects Fixed Rates
Fixed mortgage rates are not directly set by the OCR. Instead, they’re driven by:
- Wholesale swap rates — the rate at which banks borrow money in the wholesale market to fund fixed-rate mortgages
- Bank funding costs and competition
- Market expectations about where the OCR will go in the future
Swap rates respond to expected future OCR levels, not just the current OCR. If financial markets expect the OCR to fall significantly over the next 2 years, 2-year swap rates (and therefore 2-year fixed mortgage rates) will already reflect that expectation — before any OCR cut has happened.
This is why fixed rates often move before the OCR changes — and sometimes move in the opposite direction.
Example: In mid-2024, the RBNZ hadn’t yet cut the OCR — but wholesale swap rates were already pricing in future cuts. Banks started reducing 1-year and 2-year fixed rates as a result, even while the OCR remained at 5.50%.
OCR vs Fixed Rate: Which Moves First?
| Event | Impact on floating rates | Impact on fixed rates |
|---|---|---|
| OCR cut announced | Immediate ↓ | Minor — already priced in |
| OCR cut widely expected | Little change | Rates start ↓ weeks/months before |
| OCR cut surprises market | ↓ | ↓ — markets reprice quickly |
| OCR kept on hold (surprise) | No change | May ↑ if cut was expected |
Key insight: If everyone expects 3 OCR cuts over the next 12 months, fixed rates are likely already pricing those in. The moment the first cut is announced, fixed rates may barely move — or even rise slightly if fewer cuts are now expected.
The US Federal Reserve Connection
Because NZ swap rates are influenced by global bond markets, US Federal Reserve decisions also flow into NZ fixed mortgage rates — even when the RBNZ hasn’t moved.
When the US Fed signals higher-for-longer rates, global bond yields rise, NZ swap rates rise with them, and NZ fixed mortgage rates can increase even without any RBNZ action.
See How the US Fed Affects NZ Mortgage Rates for a full explanation.
What This Means for Borrowers Deciding to Fix or Float
Currently floating — OCR cutting cycle: If the OCR is falling and more cuts are expected, floating rates will continue to decline. However, fixed rates may already be pricing in future cuts. You need to decide whether to:
- Stay floating and capture each cut as it happens (good if cuts surprise to the downside)
- Fix now to lock in a rate before fixed rates rise (good if the cutting cycle is nearly over)
Fixing at the wrong time — locking in a fixed rate just before a large OCR cut — means you miss the benefit of lower rates and may face break fees if you want to change.
See When to Fix Your Mortgage NZ and NZ Mortgage Rate Forecast 2026 for current rate expectations.
Monitoring RBNZ OCR Decisions
OCR decisions are published on the RBNZ website at scheduled dates each year. Key resources:
- RBNZ website: rbnz.govt.nz — official OCR announcements and Monetary Policy Statements
- MPR dates: Published annually in the RBNZ’s meeting schedule
Each announcement includes a statement and, for MPS meetings, a full Monetary Policy Statement with rate projections. The RBNZ also publishes a forward interest rate track — their central projection of where they expect the OCR to go. This projection influences swap rates and therefore fixed mortgage rates.
Frequently Asked Questions
Does the OCR directly affect fixed mortgage rates in NZ?
No. Floating rates are directly linked to the OCR, but fixed mortgage rates are priced off wholesale swap rates. Swap rates reflect the market’s collective forecast of where the OCR will be over the fixed term — meaning fixed rates often adjust before any OCR change is announced.
How quickly do NZ floating mortgage rates change after an OCR cut?
Within days. NZ banks typically pass on OCR changes to floating mortgage rates within 3–5 business days of an RBNZ announcement.
Why do NZ fixed mortgage rates sometimes move before the OCR changes?
Fixed rates are derived from wholesale swap rates, which are priced continuously in financial markets. When markets expect the OCR to fall, swap rates fall in anticipation and banks immediately reprice fixed-rate mortgages. By the time the RBNZ cuts the OCR, the move is often already priced in to fixed rates.
What is the RBNZ OCR in 2026?
As of April 2026, the RBNZ OCR is approximately 3.25%–3.75%, down from its peak of 5.50% in mid-2023, following the series of cuts that began in August 2024.
How many times a year does the RBNZ change the OCR?
The RBNZ’s Monetary Policy Committee meets 7 times per year at scheduled dates to review the OCR. Not every meeting results in a change — rates are held when the economic outlook doesn’t warrant movement.