OCR Held at 2.75%: What Does It Mean for Your Mortgage?

After increasing the OCR in both July and September, another increase had been widely expected. Instead, the Monetary Policy Committee voted 4–3 to hold, with three members preferring an immediate increase to 3%.

For homeowners, that may sound like good news. And in the short term, it probably is. But this decision is better viewed as a pause rather than a signal that interest rates have peaked.

Why did the Reserve Bank leave the OCR unchanged?

Inflation remains above the Reserve Bank's target range, but the latest numbers came in slightly better than expected.

Annual inflation fell from 4.1% in June to 3.7% in the September quarter. Wage growth has also remained relatively subdued and medium-term inflation expectations are still stable.

At the same time, there are still reasons for the Reserve Bank to be cautious.

Fuel prices remain high, the New Zealand dollar has weakened, and price increases are becoming more widespread across the economy. The Reserve Bank currently expects annual inflation to rise again to around 4.4% in the December quarter, largely because of higher fuel prices.

So why not increase rates now? Because the domestic economy is still relatively fragile. Household spending remains subdued, employment growth is weak and house prices continue to place pressure on household confidence. The Reserve Bank also wants more time to see the effect of the two OCR increases it has already made. In other words, it is trying to balance two competing risks: allowing inflation to become entrenched versus increasing interest rates too aggressively and putting unnecessary pressure on households and businesses.

Does this mean mortgage rates won't increase?

Not necessarily. One of the most important details in yesterday's announcement was just how close the decision was.

Four members voted to hold the OCR at 2.75%, while three wanted to increase it immediately to 3%. More importantly, all members agreed that tighter monetary policy is likely to be required, although that will depend on how the economy develops. The next OCR announcement is scheduled for 9 December 2026.

Independent economist Tony Alexander has suggested there is a reasonable chance of an increase at that meeting, although ultimately that will depend on the information the Reserve Bank receives between now and then. So borrowers shouldn't interpret yesterday's decision as confirmation that rates are heading down again.

What happens to mortgage rates now?

Probably not a lot overnight. Mortgage rates aren't determined by the OCR alone. Floating rates and shorter-term fixed rates tend to be more directly influenced by the OCR, while longer fixed rates are also affected by wholesale interest rates and financial markets' expectations about where interest rates are heading.

Interestingly, wholesale interest rates eased following yesterday's surprise decision because markets had largely expected the OCR to increase. That could take some immediate pressure off mortgage pricing, but it doesn't automatically mean banks will start cutting fixed rates again. If markets continue to expect another OCR increase in December or during 2027, that expectation will continue to influence mortgage pricing. And that is exactly why trying to choose a fixed term based purely on predicting the next OCR announcement can be difficult.

Should you fix for one year, two years or longer?

This is the question many homeowners will be asking. Unfortunately, there isn't one fixed term that is right for everybody.

Someone planning to sell their home within the next year has very different considerations from someone with a large mortgage who values repayment certainty. Someone expecting to make a substantial lump-sum repayment may value flexibility. And someone whose household budget would struggle if rates increased again may place more importance on certainty than trying to achieve the absolute lowest rate.

You also don't necessarily have to make one decision for your entire mortgage. Splitting lending across different fixed terms can sometimes reduce the risk of having your whole mortgage exposed to interest rates at a single point in time. The important thing is to make the decision based on your financial position, rather than trying to outguess the Reserve Bank.

What does the OCR hold mean for house prices?

Anyone hoping that yesterday's announcement will suddenly reignite the housing market will need to be patient. The Reserve Bank says house prices are still declining and household demand remains subdued, although there are some early signs of recovery in residential investment, including in Auckland.

Holding the OCR rather than increasing it removes one potential headwind for buyers and existing homeowners. But interest rates are only one part of the property market. Affordability, incomes, employment, access to credit, investor demand and the wider economy all matter as well.

For property investors, the same principle applies: the decision shouldn't be based solely on where we think interest rates or house prices might go next. The numbers still need to work.

So what should homeowners do now?

For most borrowers, yesterday's OCR announcement isn't a reason to suddenly change course, but it is a useful reminder that the interest-rate environment remains uncertain.

If your mortgage is coming up for refixing, rather than starting with:

"What will the OCR do next?"

Start with:

"What am I trying to achieve financially over the next few years?"

Do you want to reduce debt faster? Improve cashflow? Buy an investment property? Build investments outside property? Prepare for retirement? Or simply create more certainty within the household budget?

Once you know the objective, you can make a much better decision about how your lending should be structured.

At MyFuture, that's how we approach mortgage decisions.

AI, calculators and economic commentary can give you plenty of options. We help you work out which option is right for you, build it into your wider financial plan, and then follow through.

Because whether the OCR moves up, down or sideways, the goal isn't to perfectly predict the market.

It's to make good financial decisions regardless of what the market does next.

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