What the OCR is
The Official Cash Rate is the interest the Reserve Bank of New Zealand pays banks on the money they keep in their settlement accounts with it, and it sets the rate banks pay when they borrow from the Bank overnight. Because that is what cash costs a bank at the margin, every other New Zealand dollar interest rate is priced from it. The Reserve Bank explains that it uses the OCR to keep inflation within its 1% to 3% target range, aiming for the 2% midpoint.
The rate is set by the Monetary Policy Committee, which the Bank's decisions page says reviews it eight times a year, alternating full Monetary Policy Statements with shorter Reviews. The committee can also act between meetings, as it did on 16 March 2020. A decision is announced at 2pm New Zealand time.
How a change reaches your mortgage
How quickly an OCR move reaches you depends on the kind of rate you are on.
- Floating rates are set by each bank and usually move within days of a decision, in the same direction. The bank decides by how much, so watch for its notice rather than assuming the full change is passed on.
- Fixed rates do not move until your fixed term ends. Banks price new fixed rates from wholesale swap rates, which reflect where markets expect the OCR to go over the term, so new one and two year rates often fall before a cut and rise before a rise. Short fixes of one or two years are common in New Zealand, so a change reaches many borrowers within a couple of years as their terms roll off.
- Split loans, part fixed and part floating, feel a change only on the floating part.
Two Reserve Bank rules affect how much you can borrow rather than what you pay: loan-to-value restrictions limit how much of a bank's new lending can go to buyers with small deposits, and debt-to-income restrictions, in force since 1 July 2024, limit lending to borrowers whose debt is high relative to their income.
To see what a different rate means in dollars, put it into the mortgage calculator. The 2-year fixed standard rate tracker shows how the banks' advertised fixed rates have moved beside the OCR.
How it reaches your savings
On-call savings rates tend to follow the OCR down quickly and up more slowly. Term deposits lock in a rate for their term, so one opened before a cut keeps its rate until it matures, and like fixed mortgage rates, new term deposit rates move ahead of decisions the market expects.
The savings goal calculator and the compound interest calculator take the rate your bank pays, not the OCR. Interest you earn is taxed at your resident withholding tax rate, so the return you keep is lower than the rate quoted.
Reading the chart and the table
The chart draws the OCR as steps, because it stays exactly where the committee set it until the next change. Each row is a decision that changed the rate, dated the day it was announced, as the Reserve Bank's decisions table lists it; reviews at which the rate was held are left out. The first row, 17 March 1999, is the day the OCR was introduced, not a change.
The Bank's wholesale interest rates table, B2, carries the same levels day by day. Since 2018 it shows each new rate from the day after the announcement, so its dates can run one day later than the ones here. The full series downloads as a CSV.