Thursday’s OCR drop of 0.25%, taking the Official Cash Rate to 2.25%, was broadly expected. The OCR is now firmly in what economists regard as “stimulatory” territory — designed to put more cash in the hands of borrowers and support New Zealand’s slow-growth economy. It’s been a challenging few years for many businesses and consumers.

The Reserve Bank has signalled that, assuming current economic conditions continue, this is likely the bottom of the easing cycle. While they keep the door open to future changes, the market is not expecting additional OCR cuts in 2026.

What this means for business finance and commercial lending

1. Floating business loan rates likely to decrease

Floating business finance rates should fall by close to the full 0.25% OCR reduction. However, as we’ve seen recently, the main banks haven’t always passed on OCR cuts in full. Wholesale funding pressures play a part — but margin management is also a factor as banks protect their net interest margins across business lending books.

2. Fixed interest rates for business loans may not fall

Fixed commercial lending rates are tied to longer-term swap rates.
For terms longer than three years, swap rates actually increased slightly after the OCR announcement, as markets absorbed the “bottom of the cycle” messaging. In fact, five-year swap rates have risen by around 0.30% since late October. This means the OCR cut is unlikely to shift longer-term fixed business finance rates.

What this environment means for asset finance and business borrowers heading into 2026

The lower interest rate environment creates an opportunity to reassess business finance structures and ensure they still align with your goals.

• Investing in new assets

Investing in new equipment and machinery can lift productivity and create opportunities for expansion. The cumulative impact of recent rate reductions has played a significant role here. For example, the five-year swap rates are now more than 2% lower than their October 2023 peak. For a $500,000 asset over five years, this can reduce monthly payments by around $500 per month, improving cash flow and enabling growth.

• Restructuring existing lending

Many businesses are improving cash flow by:

• refixing onto sharper business interest rates
• reassessing their amortisation structure
• extending terms to create resilience

This combination can provide the cash flow buffer needed to operate with confidence in a slower economy.

• Creating competitive tension between lenders

With a slow economy, lenders are hungry for strong credit-quality clients. Finance New Zealand can leverage its broad panel of 40+ lenders across banks, specialist asset financiers and commercial loan providers to secure sharper pricing and better structures. We can share a range of great outcomes we’ve recently achieved for our clients. Just ask your Finance New Zealand adviser.

Looking to refinance, restructure or invest in new assets?

Whether you’re:

• purchasing equipment using asset finance
• reviewing existing business loans
• refinancing your commercial lending
• or exploring new growth opportunities

Our team of experts provides tailored advice and funding solutions for businesses across every sector.

From transport and forestry to manufacturing, construction, healthcare and property, we have access to 40+ lenders and the industry experience to secure competitive, flexible outcomes.

If you’re not already working with a Finance New Zealand adviser, we’re happy to connect you with the right expert for your needs.