Feeling the Squeeze? Here’s Some Good News for Homeowners

If you’ve been feeling the pressure of high loan repayments and rising living costs, there’s finally a little relief in sight. In early October, the Reserve Bank surprised markets by cutting the Official Cash Rate (OCR) by 0.50 percentage points to 2.5 % and signalled that more reductions could follow.

Banks have already responded by trimming their fixed and floating mortgage rates. On top of that, the Reserve Bank has proposed easing its mortgage loan-to-value ratio (LVR) rules from 1 December, giving banks more room to lend to first-home buyers.

All of this is welcome news but it pays to understand what it means for you and how to make the most of it without overextending yourself.

Please note: This article is for general information only and is not financial advice. If you need advice about your situation, consider talking to a licensed financial adviser.

What’s Changed

• OCR cut: On 8 October, the Reserve Bank reduced the OCR to a three-year low of 2.5 % and kept the door open for further reductions.
• Banks respond: Major lenders have lowered both fixed and floating mortgage rates, for example, some two-year fixed rates have dropped to around 4.5 %.
• LVR easing: From 1 December, banks will be allowed to allocate up to 25 % of new owner-occupier lending to borrowers with deposits under 20 %, up from 20 % today.
  

These changes collectively create a more supportive borrowing environment but one that still requires thoughtful decisions.

Five Smart Ways to Make the Most of Lower Rates

1. Refix Smart – Keep Your Repayments High

When you refix at a lower rate, it’s tempting to reduce your repayments. But keeping them at the same dollar amount as before can make a big difference - more of each payment goes towards your loan principal, helping you clear your mortgage faster.

Even small extra repayments can shave months or years off your loan term and save thousands in interest. Most lenders allow you to pay a bit extra each month or make lump-sum payments without penalty, so check what flexibility your bank offers.

2. Opt for Flexibility

With interest rates trending lower, many borrowers are choosing shorter fixed terms - such as one year - to stay nimble if rates fall further. This can work well in a falling-rate environment, but it’s important to remember that rates won’t stay low forever.

Economists note the OCR has fallen from 5.5 % to 2.5 % in just over a year, and many expect it to stabilise somewhere between 2.0 % and 3.5 %. Choosing a shorter term can give you flexibility, but make sure your repayments would still be affordable if rates rise again next year.

3. Do Your Homework

Don’t assume rates will continue falling indefinitely. Keep an eye on economic forecasts, inflation trends, and commentary from the Reserve Bank. Sorted’s mortgage calculator is a great way to stress-test your budget - you can see how your repayments might change at higher rates.

The Reserve Bank has also cautioned that house prices remain flat and overall growth is weak. That means the road ahead could be bumpy and borrowers who plan ahead will be best placed to adapt when conditions change.

4. Don’t Over-Borrow Despite Looser Rules

The proposed LVR changes give banks more freedom to lend to low-deposit borrowers, but that doesn’t mean everyone should stretch their budget. A bigger deposit and a manageable debt level will always reduce your financial risk.

If you’re buying your first home, size your repayments so you can still build an emergency fund, manage everyday expenses, and continue paying off higher-interest debts. The aim is to take advantage of opportunity — not overcommit in uncertain times.

5. Channel Savings Into High-Interest Debt

If your mortgage repayments drop due to lower rates, think about redirecting that difference to pay down higher-interest debt like credit cards or personal loans.

Clearing those balances faster can save you more in total interest than you’d gain by making only modest extra mortgage payments. It’s also a way to strengthen your overall financial resilience — reducing stress and freeing up future cash flow.

The Big Picture: Building Financial Resilience

Lower interest rates and looser lending rules can provide a welcome boost for homeowners and first-home buyers alike. But they’re not a guarantee of cheaper borrowing forever.

Take advantage of today’s lower rates to pay down debt faster and build your financial buffer. At the same time, keep an eye on your budget and what economists are predicting — being proactive today sets you up for long-term stability tomorrow.

At HealthCarePlus, we always come back to our financial-resilience framework:

• Build and maintain an emergency fund
• Reduce high-interest debt
• Protect your future through smart, sustainable decisions

By keeping these principles in mind, you can make today’s good news part of a stronger financial future.

Sources:

• 1news.co.nz – Reserve Bank OCR decision and bank rate responses
• rbnz.govt.nz – Official Cash Rate and LVR policy updates
• moneyhub.co.nz – Mortgage rate comparisons and analysis
• sorted.org.nz – Mortgage calculator and budgeting resources
• healthcareplus.org.nz – Financial wellbeing resources

Written by: Alan Sharpe

Alan is a key member of the HealthCarePlus leadership team. With over 30 years experience in marketing and customer service roles he is a passionate advocate for the union movement and HealthCarePlus’s mission to create real, lasting value for their members