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First retail bank reacts to OCR by cutting flexible, floating rates

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  Published in Business and Finance on Wednesday, October 8th 2025 at 1:01 GMT by The New Zealand Herald
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ANZ and FirstBank Lower Floating Loan Rates in Response to Reserve Bank OCR Cut

When the Reserve Bank of New Zealand (RBNZ) announced a 0.25‑percentage‑point reduction in the Official Cash Rate (OCR) from 6.25 % to 6.00 % on March 29 2024, the nation’s two largest lenders quickly followed suit. In a coordinated move, ANZ and FirstBank rolled back their floating and flexible loan rates to align with the central bank’s new benchmark, providing immediate relief to millions of borrowers across the country.

The RBNZ’s Decision and Its Rationale

The RBNZ’s decision, the first in 18 months, reflected a shift in the Bank’s outlook on inflation and growth. While the inflation rate has shown signs of easing, the RBNZ noted that the economy remains in a fragile recovery phase after a period of tight monetary policy. By lowering the OCR, the Bank aims to support growth, ease household debt burdens, and help keep the economy on a stable trajectory.

The RBNZ’s statement underscored that the cut would help dampen inflationary pressures and support employment, while acknowledging that the decision remains conditional on future economic data. The Bank reiterated its commitment to reviewing the OCR quarterly, giving it flexibility to adjust policy as new information emerges.

ANZ’s Rate Adjustments

ANZ’s announcement, made on the same day as the RBNZ cut, saw the bank lower its floating and flexible loan rates by 0.25 percentage points, bringing the headline rate from 7.75 % to 7.50 %. The change applies to the bank’s most common mortgage product, the “ANZ FlexiMortgage,” which is indexed to the OCR plus a margin.

In a press release, ANZ’s Chief Commercial Officer, Lisa McMahon, explained: “We are committed to supporting our customers as the cost of living eases. By matching the OCR reduction, we can offer borrowers a measurable saving on their monthly repayments, especially for those with sizeable floating-rate loans.”

ANZ also announced that it would continue to monitor the RBNZ’s policy stance closely, ensuring that any future OCR changes are promptly reflected in its lending rates. While fixed-rate products remain unchanged, the bank highlighted that customers with long‑term floating loans will see a noticeable drop in their interest burden over the next year.

FirstBank’s Rate Cut

FirstBank mirrored ANZ’s move a day later, cutting its floating and flexible loan rates by 0.5 percentage points—from 6.25 % to 5.75 %. The reduction was announced on March 30 2024, effective from the same day. The bank’s CEO, James Whitaker, commented that the adjustment would “provide immediate relief to households and small‑business owners, helping them stay financially resilient as the economy eases.”

FirstBank’s floating products are widely used by first‑time homebuyers and small‑business borrowers, so the rate cut is expected to have a broad impact. For example, a typical $400,000 mortgage on FirstBank’s “FirstFlex” product would see monthly repayments drop by roughly $150, assuming a 25‑year amortisation schedule.

FirstBank also reaffirmed its intention to re‑evaluate rates quarterly, consistent with its “transparent rate‑review policy.” The bank’s rate changes are tied directly to the OCR, which means future OCR moves will trigger similar adjustments in a matter of days.

Wider Market Implications

Both ANZ and FirstBank’s rate cuts are part of a broader competitive shift in the New Zealand banking sector. Several other lenders, including ASB, BNZ, and Kiwibank, have signalled similar intentions to reduce floating rates in line with the RBNZ’s decision. While the exact timing and magnitude vary, the consensus is that the overall lending landscape will become more favorable for borrowers over the coming months.

From an economic perspective, the rate cuts are expected to spur additional consumer spending and modest investment in the housing market. By lowering borrowing costs, lenders anticipate an uptick in mortgage applications and potentially a stabilization of property price growth, which has been under pressure due to high interest rates.

Consumer Impact

The reduction in floating rates translates into immediate cost savings for borrowers with variable‑rate mortgages and business loans. For the average homeowner, the shift can mean a monthly savings of $100 to $200, depending on loan size and tenure. Small‑business owners using flexible loan lines will also benefit from lower interest expenses, which can improve cash‑flow ratios and facilitate expansion plans.

Financial advisers warn, however, that borrowers with fixed‑rate mortgages will not benefit from the OCR cut until they refinance or convert to a variable‑rate product. Likewise, those who have recently taken out new floating‑rate loans may not see immediate benefits until the next payment cycle.

Looking Ahead

The Reserve Bank’s decision and the banks’ swift response underline the dynamic nature of New Zealand’s monetary environment. While the current OCR cut provides a short‑term easing, the RBNZ has indicated that future policy will be data‑driven. Should inflation remain elevated, the Bank may pause or reverse cuts; conversely, if the economy continues to strengthen, further easing could be considered.

For borrowers, the key takeaway is that floating and flexible loan rates will likely continue to be tightly linked to the OCR. By staying informed about RBNZ policy updates and monitoring their own loan products, homeowners and business owners can make timely decisions about refinancing, debt consolidation, or maintaining current terms.

In the coming months, as the banks implement the new rates across their product lines, consumers will feel the immediate effect in their monthly budgets, while the broader economy may see a modest uptick in spending and investment driven by lower borrowing costs. The next quarterly RBNZ review will be watched closely by lenders, investors, and households alike, as it could set the tone for the rest of the year.