New Zealand Cuts Cash Rate to 2.25%, Boosting Borrower Confidence

The Reserve Bank of New Zealand has made a significant move by reducing the official cash rate (OCR) by 25 basis points to 2.25%, the lowest level since June 2022. This decision, announced on November 26, 2025, is designed to support economic recovery ahead of the holiday season, offering a glimmer of hope for borrowers.

Mortgage expert Nathan Miglani from Squirrel, who closely monitors housing and mortgage trends, stated that this cut aligns with industry expectations and provides welcome news for those looking to borrow. “The OCR cut will create more momentum in the property market. This points to recovery in the market,” Miglani noted in an interview.

Despite this positive outlook, Miglani cautioned that sectors such as hospitality and retail remain under pressure, with business confidence still subdued. He explained that the full impact of an OCR cut typically takes around nine months to materialize. “Today’s OCR cut impact will be visible next year,” he added.

As the lower interest rates begin to take effect, Miglani advised borrowers to seek guidance before finalizing their home loans. In response to the rate cut, Finance Minister Nicola Willis has urged banks to pass on “as much as possible” of the OCR reduction to home loan rates. Following the Reserve Bank’s announcement, banks started to lower floating mortgage rates on the same day.

While speaking in Auckland on Thursday, Willis expressed optimism that mortgage-holders would feel the benefits of the rate cut. The Reserve Bank will be closely monitoring how banks respond to this change.

Miglani also highlighted the increasing competition among banks, referring to the current climate as a “mortgage war.” This competition has led to attractive cashback offers for borrowers, making the market more appealing.

Looking ahead, Miglani predicts that the property market will strengthen in 2026, which could further enhance borrower confidence. As economic conditions improve, the combination of lower interest rates and heightened competition among financial institutions may create a more favorable environment for those seeking mortgages.

This decision by the Reserve Bank of New Zealand reflects a strategic effort to stimulate economic activity and support borrowers during a critical period, particularly as the holiday season approaches.