Are We Finally at the Bottom? An OCR Update on Rates, Cashbacks, and What It Means for Your Mortgage

Dec 3, 2025
3 min read

Updated: Feb 12

The Reserve Bank’s OCR cut last week created plenty of interest and naturally led many to expect mortgage rates to fall straight away. Floating rates did ease, but fixed rates have not followed and there's a straightforward reason for that.

OCR: Floating Rates Have Eased, Fixed Rates Are Holding Firm

Floating rates dropped shortly after the OCR cut, which is normal as they tend to move in line with short-term changes in the cost of borrowing.

Fixed rates, however, stayed put. This is because wholesale rates (the funding costs behind fixed loans) increased immediately after the Reserve Bank’s announcement.

Although the OCR was reduced, the RBNZ also signaled that more cuts are unlikely in the near future. That message matters.

Will Fixed Rates Drop From Here?

Possibly, but nothing is guaranteed.

If competition heats up between banks, we may see lower short-term fixed rates offered as part of sharper pricing.

However, whether fixed rates broadly fall depends on what happens to wholesale funding costs, which are influenced by global markets, inflation data, and future Reserve Bank commentary. So while there’s a chance, it’s not something to rely on.

Banks Are Offering Strong Cashback Incentives

While fixed rates have held steady, banks are competing aggressively in other ways, especially through cashback offers of up to 1.5%.

On a $600k mortgage, this could mean up to $9,000, which can meaningfully help at an expensive time of the year. Still, it’s important to consider these incentives within your broader financial strategy.

Are We Near the Bottom of the Cycle?

Based on current signals and assuming no major economic surprises, it’s likely we are close to the bottom of the interest rate cycle.

There may still be minor movements and competitive pricing, particularly for shorter terms, but large drops appear unlikely under the current economic outlook.

This makes the structure of your lending especially important.

Why Structure Matters More Than the Headline Rate

The “best” mortgage is rarely just the cheapest rate. It’s the structure that supports your current lifestyle and your next 12–60 months.

Key factors include:

upcoming changes in income
renovation or upgrade plans
desire for certainty vs flexibility
lump-sum payments you may want to make
how long you intend to hold the property
whether you may need access to revolving credit or an offset

Two people with the same interest rate can have very different outcomes depending on their structure.

Planning Ahead: Avoiding a Future Repayment Shock

Even if rates settle for now, they won’t remain low forever. When the cycle eventually turns, you don’t want your entire loan rolling off at once into a steep increase. A staggered or diversified structure can help protect your cashflow and make future rises more manageable.

Why It’s Worth Getting Advice Now

With floating rates easing, fixed rates steady, and strong cashback incentives available, now is an ideal time to review your mortgage strategy.

If you're unsure about: