What is the OCR and how does it affect you?

4 min read
22 February, 2023

The Reserve Bank increased the OCR today from 4.25% to 4.75%. It's a significant change, but what does it mean and how could it affect you?

The cost of living is high and inflation is running hot. Increasing the OCR could help slow inflation and solve this problem but it may make things worse in the short term. 

So what is the OCR? How does it work? And how could it affect you? 

What is the OCR?

The Official Cash Rate is a wholesale interest rate set by the Reserve Bank of New Zealand (RBNZ) for transactions between banks. This rate affects the cost of operating for banks and the rates that they can offer their customers. 

When the OCR is increased, generally so do interest rates on consumer mortgages, personal loans and other forms of debt - along with the rates on term deposits and savings accounts. 

How does the OCR work? 

It’s the RBNZ’s job to keep inflation between 1% and 3%, but in 2022 inflation was much higher at 7.2%. The RBNZ uses the OCR as a tool to get inflation back under control and within the ideal range. 

When the OCR increases, so too does the cost of borrowing and servicing a mortgage which leaves consumers and businesses with less money to spend. 

Since consumers and businesses have less money in their pockets, demand for goods and services reduces. All things equal, this should slow down inflation by decreasing upward pressure on prices. 

How could the OCR affect me? 

When the OCR is increased it’s often followed by interest rate increases on mortgages, personal loans, car loans, business loans, credit cards and all other types of credit. 

The upcoming OCR increase could result in increases on some or all of these products. 

Those with fixed mortgage interest rates may jump up onto a higher interest rate after their fixed period ends as a result of the OCR increase. Those on variable rates (usually called 'floating rates') may notice an increase right away. 

On the flip side, interest rates on term deposits and savings accounts may increase, giving you a better return on your savings. 

How can you navigate the impact of OCR increases?

The OCR increases may make the cost of living crisis for many Kiwis worse, especially those with large mortgages.

The risks of leaving inflation unchecked can be far worse. Inflation erodes the purchasing power of your money (meaning you can buy less stuff with the same amount of cash) and it disproportionately affects low income households. Once inflation is under control, OCR increases can be wound back to reduce interest rates and pressure on household budgets. 

Nonetheless, these OCR increases will no doubt cause short-term pain in the short-term. Here are some places and resources that might help:


MoneyTalks is a free, confidential financial helpline. Initial support is offered over the phone, but MoneyTalks can also put you in touch with a local service for face-to-face help from a Financial Mentor. A financial mentor can help you set goals and make a financial plan. They can also connect you with local foodbanks, as well as help you navigate Work and Income processes and entitlements. 

If you’re struggling with debt this service is one option that will equip you with some basic knowledge around how to improve your situation. A Financial Mentor can not only address your current situation but set you up with good savings habits for the future.  

Call 0800 345 123 or visit moneytalks.co.nz

Citizens Advice Bureau 

Citizens Advice Bureau is a locally-based community organisation. Volunteers in more than 80 locations around New Zealand offer assistance with money matters by offering advice about steps you can take. Some also offer budgeting clinics to help you improve your knowledge in this area.  

The advice the volunteers provide is free, confidential and independent and it’s available to anyone.  If they can’t help you themselves, they’ll make you aware of how to access the services you do need. 

Find your local Citizens Advice Bureau for more information on how it can help. Call 0800 367 222 or visit cab.org.nz/find-a-cab.  

Your bank or financial services provider 

Another place to improve your financial know-how is your bank or another financial services provider. If you visit your local branch or give them a call, they should be able to put you in touch with someone who can help. Banking, mortgage, insurance or investment specialists can help you with specific questions you might have around your everyday banking, home loan, insurance policies or investment portfolio.  

These services are usually free and can be a good way of picking up some extra knowledge through a provider you already use and trust.  

Many also offer services such as financial hardship support and domestic violence support if you need financial help as a result of a tough situation. 


Tools, guides and resources for budgeting, retirement planning, managing your debt, investing and much more. 

A financial adviser

A financial adviser will be able to help guide you through and give you personalised advice based on your individual circumstances.

Find out more about getting help with your finances here.


This 'What is the OCR and how does it affect you?' industry news is general information only. The views and opinions expressed do not necessarily reflect those of the FSC. It is not intended to constitute legal or financial advice and does not take your individual circumstances and financial situation into account. We encourage you to seek assistance from a trusted financial adviser, legal or other professional advice.

The names of any third parties are additional resources that you access at your own risk and the FSC takes no responsibility for any third party content. 

The FSC and its employees make no express or implied representations or give any warranties regarding this industry news, and we accept no responsibility for any loss, damage, cost or expense (whether direct or indirect) incurred by you as a result of any error, omission or misrepresentation in this blog.  

22 February 2023.

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