With the OCR down another 25bps on Wednesday, it appears we’re looking at a likely OCR rate of 2.5% by mid-2026. The market is now debating whether the next cut will come at the October meeting followed by another in November, or if the Bank will wait until November and then pause until post-holiday February. Time will tell.
As we’ve seen recently, these expectations have already been partly priced in, meaning any future OCR cuts will likely be passed on in modest increments—approximately 10 to 15 basis points per reduction.
We’re now operating at the fringes, and seeing a “4” in the rate is a welcome sight. It’s been a smooth descent over the past year, with the one-year fixed rate dropping from a peak of 7.49% to today’s low of 4.75%.
Many borrowers opted for shorter-term strategies, and with 81% of all mortgages maturing within a 12-month period, we’re about halfway through that cycle.
So, what now? A fair question. Those who’ve worked with me over the years will know I’ve long advocated for the “eye on the ball” strategy—rolling over on 12-month terms. While this approach still has merit, there’s now growing appeal in a split strategy. Fixed terms from one to three years each offer advantages, albeit the 6-month rate also has appeal due to the possibility of back-to-back cuts towards the end of 2025.
Sometimes, simply choosing the most competitive rate is the best move—particularly given the uncertainty ahead. The big unknown is how long will these rates remain available either up or down hence, and therefore the need for some solid financial advice
In my view, economic recovery will be gradual. We’ve endured a deep recession, and while rates should remain relatively low for the foreseeable future, we can expect some fluctuation depending on inflation trends. The agricultural sector is showing pockets of strength, but many industries and businesses are still navigating difficult conditions, which should help keep inflation in check.
— Tony Mounce, Managing Director