A split vote and rising inflation signal New Zealand's rate pause is nearly over
New Zealand mortgage advisers should prepare clients for higher borrowing costs after the Reserve Bank held the Official Cash Rate at 2.25% on Wednesday — but only by the narrowest of margins, with the committee split and chairperson Governor Anna Breman casting the deciding vote to hold.
The Monetary Policy Committee voted three to three on whether to hold or raise the OCR by 25 basis points. With the vote tied, Breman exercised her casting vote in favour of holding.
The committee was unambiguous about what comes next.
"The Committee remains focussed on bringing medium-term inflation back to target and expect that OCR increases will be required this year," it said.
A committee divided
The three members who voted to hold — Breman, Karen Silk, and Paul Conway — argued that core inflation and wage growth remain contained, that economic conditions have deteriorated faster than expected, and that tighter financial conditions are already weighing on household and business sentiment. They favoured waiting for more data before acting.
The three members who voted to hike — Carl Hansen, Hayley Gourley, and Prasanna Gai — argued the risk of second-round inflation effects was rising and that monetary conditions remained accommodative. One member, Carl Hansen, noted that raising the OCR at this meeting "would also create optionality for further monetary policy tightening in July."
What it means for borrowers
All six members agreed that increases are coming — the only disagreement was timing. With July already in view as the next potential move point, the inflation picture is the key concern for clients with mortgages coming up for renewal.
Annual CPI sat at 3.1% in the March quarter — above the RBNZ's 1–3% target band — and the committee now forecasts inflation peaking at 4.3% in the September quarter before returning to the 2% midpoint in mid-2027. The Middle East conflict is driving higher fuel, plastics, and fertiliser costs through supply chains, with some businesses already imposing temporary fuel surcharges.
Mortgage rates have already started moving independently of the OCR, with fixed-term rates rising through wholesale markets. The average interest rate on outstanding mortgages fell to 4.9% in March but is expected to climb to 5.3% over the next 12 months, according to the committee's own projections — a material increase for borrowers on fixed terms rolling off in the near term.
See the RBNZ announcement here.
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
