The OCR Explained - How Does It Affect You as a Property Investor?
- Ryan Smith
- Nov 22, 2022
- 4 min read
Updated: Aug 5
The OCR is a key driver of house prices in New Zealand, so it's important to understand what it is, and how it affects you.
If you’ve been paying any attention to the financial news lately, chances are you’ve heard about the Official Cash Rate (OCR), probably more times than you’d like.
But do you really know what it is and, more importantly, how it directly impacts you as a property investor?
Let’s break it down.
What Is the OCR?
The Official Cash Rate, or OCR, is set by the Monetary Policy Committee at the Reserve Bank of New Zealand (RBNZ).
It’s essentially the benchmark interest rate that influences how much it costs banks to borrow money, and therefore how much they charge you to borrow money.
In short, when the OCR goes up, interest rates across the economy tend to follow. When it goes down, borrowing becomes cheaper.
How Often Is the OCR Reviewed?
The OCR is reviewed seven times per year. And each of those review dates gets circled on every investor’s calendar, because changes to the OCR almost always lead to changes in mortgage interest rates, savings rates, and the cost of living.
Why Does the OCR Matter?
The OCR is one of the RBNZ’s key tools to control inflation and economic growth. If inflation is too high, say, due to excessive consumer spending and not enough saving, the RBNZ might raise the OCR.
When borrowing becomes more expensive (thanks to higher interest rates), people and businesses tend to:
Spend less
Save more
Borrow more cautiously
This slows down economic activity, which helps bring inflation under control.
Counterintuitive? Maybe. But it’s about striking the right balance between growth and stability.
How the OCR Affects Property Investors
So, what does this all mean for you as a property investor?
It means your mortgage costs, whether you’re buying your first rental or adding to a portfolio, are directly tied to the OCR.
When the OCR increases, banks typically hike up their mortgage interest rates. And like any business, banks pass that cost on to consumers.
Let’s make it clear with an example.
Case Study: Mortgage Shock
An investor holds a $500,000 interest-only mortgage.
Their current rate is 3%, meaning they pay $1,250 per month in interest
When the mortgage renews at 6%, the monthly interest cost becomes $2,500
That’s double the cost for the exact same loan.
This is why investors closely watch OCR decisions. A 3% rise doesn’t sound like much until it eats half your cash flow.
Long-Term Thinking Still Wins
Despite these short-term hits, property remains a long-term game.
Yes, higher interest rates may hurt today. But over a 10+ year horizon, the fundamentals still favour property:
Rents tend to rise during inflationary periods
Capital growth over time often outpaces inflation
Tangible assets like property hold intrinsic value in turbulent markets
Smart investors adjust their strategy, not their conviction.
How Can We Help You?
We help Kiwis build wealth through property investment. Our advisors will take the time to understand your individual needs and recommend suitable investment properties to help you build wealth and set up your retirement.
What Does This Look Like?
We use a 3-step process:
We start with a Discovery Meeting where we learn about you, your goals, etc., and you learn more about us.
This is followed by a Strategy Meeting where we model your retirement plan, understand key investment concepts, and briefly touch on some investment choices.
Finally, an Asset Selection Meeting where we discuss investment options in more detail and make any recommended adjustments based on what we now know about you.
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What Do We Do, And What Don't We Do?
What We Do
We offer end-to-end New Zealand property investment advice, helping Kiwi investors grow wealth through smart, data-led decisions. Our focus is on quality new builds in strong locations, tailored to your goals, guided by a team that knows the NZ market inside out.What We Don’t Do
We don’t do KiwiSaver, shares, cryptocurrency, or broad financial planning. Thrive is not a generalist firm. We specialise in property investment in New Zealand because that’s where we deliver the most value. By staying focused, we cut through the noise and help our clients make confident, well-informed property investment decisions.
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