What the budget and OCR cut mean for you

BY JULIUS CAPILITAN, C21 FINANCIAL

May has delivered two big headlines for Kiwis watching their wallets: the upcoming New Zealand Budget and the Reserve Bank’s latest interest rate cut. Both play a big role in shaping the financial landscape for anyone looking to buy a home, refix their mortgage, or grow their small business.

So what’s actually happening and how could it affect you?

Budget 2025: lean, focused, and all about growth

Finance Minister Nicola Willis is calling this the “Growth Budget” – and not just because it sounds good. This year’s Budget is one of the tightest in recent memory, with very little room for new spending. Instead of handing out sweeteners, the government is prioritising long-term stability, infrastructure, and supporting productivity

Key takeaways for buyers and homeowners:

• No new grants for first-home buyers – The First Home Grant was scrapped last year, but the First Home Loan (5% deposit option backed by Kāinga Ora) is still available.

• More social and affordable housing supply – An extra $140m has been committed to deliver 1,500 new homes through community housing providers.

• Stricter control on spending – This helps keep inflation down, which supports lower interest rates.

For property investors:

You’ll benefit from recent tax changes already in play:

• Mortgage interest is once again fully tax-deductible.

• The bright-line test (a type of capital gains tax) has been reduced from 10 years to just 2 years.

• Lending rules have relaxed slightly – including lower deposit requirements in some cases.

Julius Capilitan of Century 21 Financial says:

“This budget isn’t about handouts – it’s about creating an environment where growth is sustainable and inflation stays down. that’s what allows interest rates to keep falling, which is great for home buyers.”

OCR down to 3.50% – and still falling

On 9 April, the Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate (OCR) to 3.50% – the fifth rate cut since August last year.

This matters because the OCR helps determine what banks charge on your home loan or business overdraft. And here’s the good news: more cuts are expected

The RBNZ is widely tipped to lower the OCR again in late May – possibly down to 3.25% , with the rate falling even further later in 2025.

What this means for you:

• Floating mortgage rates are already falling.

• Fixed rates (especially 1- and 2-year terms) are sitting around 4.99% , and could drop again if banks anticipate further OCR cuts.

• Some homeowners with less than 20% deposit may now qualify to refinance at a better rate – potentially saving hundreds per month Julius says:

“We’re helping a lot of clients refinance into better structures – especially those who bought in 2021–22 with high rates or low deposits. Lenders are more flexible now, and repayments are starting to drop.”

In summary

May’s developments give us cautious optimism:

• The Budget keeps inflation in check – helping interest rates fall.

• The OCR is expected to keep dropping – meaning lower repayments for borrowers.

• Home prices are steady, lending is a little easier, and tax settings favour long-term property investors.

If you’re unsure whether to buy, sell, refinance or restructure – now’s the time to talk to someone . At Century 21 Financial, we help you understand the market, crunch the numbers, and make confident decisions so you can make your Move Of the Century.