We saw major banks trim their home loan floating rates immediately, and business floating rate products will fall by similar amounts in coming weeks as the banks adjust their business base rates. Rate reductions have been well priced in by wholesale markets, so the OCR cut had little effect on fixed rates longer than three years. In fact, five-year fixed rates crept up slightly last week, impacted more by international factors than domestic rate decisions. Overall, wholesale interest rates are now between 1.20% and 1.50% lower than they were in October last year, easing the cost of borrowing for businesses and consumers.

It will be market sentiment regarding future rates falls that will define how much further these wholesale rates will fall in the short term. Over the next 1-2 weeks, the markets will closely monitor New Zealand and international inflation data. As long as inflation remains within central bank targets, there is a possibility of further rate cuts in late 2024. If inflation data come in higher than expected, the pace of rate reductions could slow and further reductions could be pushed into 2025.

You can talk to your local Finance New Zealand adviser about how to mitigate interest rate fluctuations and place your business in the best position possible.