PHOTO: Is your mortgage safe? What today’s inflation figures really mean for your repayments. FILE
📅 July 2025
🔍 Key Takeaways:
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🏦 OCR likely to be cut in August
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💰 Short-term mortgage rates may ease slightly
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🌍 Global factors still shape long-term rates
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📉 Economists suggest further cuts are on the horizon
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Inflation has crept up to its highest level in a year, recording a 2.7% annual rise in the June 2025 quarter. But if you’re a homeowner wondering what this means for your mortgage – don’t panic. Despite the uptick, most experts agree this isn’t a game-changer for your home loan interest rate.
In fact, the Reserve Bank of New Zealand (RBNZ) is widely expected to trim the Official Cash Rate (OCR) by 25 basis points (bps) in August, which may offer some relief to mortgage holders through marginally lower short-term rates.
📉 Where Have We Come From?
Since the end of 2021, the RBNZ aggressively raised the OCR to battle inflation, which once surged over 7%. The current 2.7% figure is uncomfortable, yes – particularly with rising council rates and rental costs – but it’s still within the Reserve Bank’s expectations, as published earlier this year.
📊 What Are the Banks Saying?
Here’s a breakdown of what the major financial players are forecasting:
🧠 ANZ: OCR Cuts Are Coming Faster
“We continue to pencil in OCR cuts for August, November and February,” says senior economist Miles Workman. “Today’s data suggests the easing we’ve long expected could arrive more quickly.”
Workman even hints at the possibility of cuts outside the usual Monetary Policy Statement cycles, especially if upcoming labour market data (due early August) shows weakness.
🏦 Kiwibank: The OCR Should Drop to 2.5%
Kiwibank economists argue the Reserve Bank still has room to move, given the drag caused by New Zealand’s recent recession.
“We expect inflation to drop to 1.8% in 2026. If that plays out, it means the RBNZ is currently overdoing it.”
Their call: Let the OCR fall to 2.5% to stimulate employment and economic growth.
📉 Westpac: Watching Core Inflation Closely
Westpac is also tipping an August cut, but is taking a more cautious tone.
“We’re expecting a 25bps drop next month, but we’ll be monitoring core inflation trends to assess whether deeper easing is justified.”
📈 Infometrics: 3% May Be the Sweet Spot
Chief forecaster Gareth Kiernan sees the Reserve Bank pausing at 3%.
“There are signs inflationary pressure is becoming more isolated rather than widespread. That’s encouraging – but we’ll need to see sustained weakness in employment and consumer spending before predicting deeper cuts.”
💼 ASB: Expect August Cut – But Risks Remain
ASB economists also see a 25bps drop in August but warn that both upside and downside risks remain.
“If economic activity weakens more than expected and unemployment hits 5.3% this year, we could see the OCR go below 3%. On the flip side, persistently high inflation could delay further cuts.”
📌 What Does This Mean for YOU?
✅ If you’re on a floating mortgage – there’s potential for a slight reduction in interest soon.
✅ If you’re due to refix – watch for competitive shorter-term fixed rates post-OCR announcement.
⚠️ If you’re locked into a longer-term rate – remember those are influenced more by global trends than domestic inflation.
📉 Bottom Line:
Despite the headline inflation rise, mortgage holders can breathe a little easier. The overall direction of travel remains downward for the OCR – and possibly, for interest rates too. The Reserve Bank is expected to shift gears from its brake-heavy policy and begin accelerating support for the economy.
📆 Watch out for key economic indicators in early August – including labour market data – which could determine just how far and how fast interest rates will fall.
📣 Tell us:
Are you planning to refix your mortgage soon? What’s your biggest concern as a homeowner right now? Comment below: