OCR vs Swap Rates: Why Fixed Mortgage Rates Don’t Always Follow the OCR

The short version is this: the OCR is a big driver of short-term borrowing costs, but fixed mortgage rates are heavily influenced by wholesale interest rates (swap rates) and what markets think will happen next.

That’s why the same month can contain both:

• An OCR cut that lowers floating and short-term pricing pressure, and

• Rising longer-term fixed rates if wholesale rates lift.

In late 2025, we saw exactly this dynamic play out.

If you’re coming up to a refix, you might also want to take a look at our 2026 refixing decision framework.

The two interest rate worlds you need to understand

The OCR world

The Official Cash Rate is set by the RBNZ and acts as a benchmark for short-term interest rates in New Zealand. When it moves, it tends to feed through most directly to:

• Floating mortgage rates (often with a lag)

• Very short fixed terms (like 6–12 months), especially when banks are competing

In November 2025, the RBNZ lowered the OCR to 2.25% and signalled future moves depend on how inflation and the economy evolve.

For borrowers, that “future moves depend” line matters just as much as the cut itself, because it influences market expectations.

The swap rate world (wholesale rates)

Swap rates are wholesale interest rates banks use to hedge fixed-rate lending. In plain terms:

• When a bank offers you a 2-year fixed rate, it typically hedges that exposure in wholesale markets.

• If 2-year swap rates rise, it becomes more expensive for banks to offer (or maintain) low 2-year fixed mortgage rates.

• If swap rates fall, fixed rates tend to follow lower, usually with a lag.

The RBNZ’s November 2025 Monetary Policy Statement explicitly notes that advertised mortgage rates have declined broadly in line with falls in equivalent wholesale rates (with a lag), and discusses the relationship between mortgage rates and swap rates.

Why fixed rates can rise after an OCR cut

Here are the most common reasons, explained without the jargon.

Markets can decide the OCR is “near the bottom”

Wholesale markets are forward-looking. If investors and banks believe the OCR is close to the bottom of the cycle, longer-term wholesale rates can lift even while the OCR is being cut.

In mid-December 2025, mortgagerates.co.nz noted wholesale swap rates had been tracking upwards, reflecting expectations that the market was near the bottom of the cycle.

Longer terms are influenced more by wholesale rates than today’s OCR

A very clear example showed up in December 2025 when lenders lifted longer-term fixed rates in response to rising wholesale interest rates.

One lender’s CEO was quoted noting that longer-term fixed mortgage rates are influenced primarily by wholesale interest rates and the future rate outlook, rather than the current OCR.

That’s the key point: the OCR is the “today” rate, but a 3–5 year fixed mortgage rate is priced off a “multi-year expectations” world.

Funding costs and competition also play a role

Even with the same swap rates, banks can price differently depending on:

• How aggressively they want market share

• Their mix of funding (term deposits vs wholesale)

• How much margin they’re willing to give up

This is why you’ll often see mixed moves across terms at the same time (some rates up, some down, some unchanged).

What this means for borrowers refixing in 2026

Don’t anchor on the OCR headline

OCR moves are important, but they’re not a complete guide to where fixed rates go next.

A more useful question is: what are wholesale rates doing at the term you care about (1-year, 2-year, 3-year), and what’s the market signalling about the next 12–24 months?

Use structure to manage uncertainty

Because wholesale rates can move independently of the OCR, trying to “perfectly time” a single fixed term can backfire.

That’s why in 2025 we saw more borrowers leaning into structure:

• Splitting loans across multiple terms (a ladder)

• Keeping some flexibility for future refixes

• Considering offset/revolving credit when cash buffers allow

If you want practical how-to content on that:

• Fixed vs floating: https://www.newzealandmortgages.co.nz/blog/fixed-vs-floating-what-should-you-choose-when-refixing-your-home-loan

• Mortgage laddering: https://www.newzealandmortgages.co.nz/blog/mortgage-laddering-how-to-optimise-your-home-loan-by-splitting-into-multiple-parts

• Offset vs redraw vs standard: https://www.newzealandmortgages.co.nz/blog/mortgage-repayment-structures-explained-offset-vs-redraw-vs-standard-loan

Watch inflation, because it shapes the “how far can cuts go” debate

By late January 2026, annual CPI inflation was reported at 3.1% (December 2025 year). That matters because higher inflation generally reduces how fast (or how far) a central bank can ease.

The RBNZ’s November 2025 MPS also discussed inflation being at the top of the target band at that time and the conditional nature of future OCR moves.

Practical checklist when you’re refixing

Step 1: Pick your priority

• If you need certainty, fix more (and potentially longer) for the “sleep at night” portion.

• If you value flexibility, keep at least some portion short or floating.

Step 2: Compare offers across terms, not just “the best rate”

A common mistake is to grab the lowest 1-year rate without asking:

• What does the 2-year look like?

• What does the 3-year look like?

• What does a split look like for my budget risk?

Step 3: Start early so you can negotiate

Starting 60–90 days out generally gives you more leverage and more time to structure properly.

If you’re considering switching lenders, read:
https://www.newzealandmortgages.co.nz/blog/refinancing-strategy-how-to-optimise-in-a-falling-rate-environment

Summary

The simple takeaway

• The OCR matters most for floating and shorter-term pricing.

• Fixed rates are heavily influenced by wholesale swap rates and the market’s future rate expectations.

• That’s why longer-term fixed rates can rise even when the OCR is being cut.

• In 2026, structure (splitting, laddering, and flexibility) is often a safer win than trying to pick the exact bottom.

Talk to an adviser

If you’re refixing soon, we can help you turn the “OCR vs swap rates” noise into a clear plan. Our advisers can:

• Compare fixed terms and structure options across lenders

• Negotiate where it makes sense (especially for stronger equity profiles)

• Build a split strategy that fits your cashflow and risk tolerance

• Sense-check break fees and switching costs if refinancing is on the table

Get in touch and we’ll walk you through your options in plain English.