OCR has increased, blah, blah, blah...

Predictably, the headlines quickly followed: "Interest rates rise again." But the reality is a little more nuanced than that.

For some borrowers, this week's announcement will have an immediate impact on their mortgage repayments. For others, it may have little effect at all.

The reason comes down to a distinction that's often overlooked: floating rates and fixed rates respond to different forces.

What happened this week?

On Wednesday, the Reserve Bank raised the Official Cash Rate (OCR) by 25 basis points to 2.75%, marking the second increase since the tightening cycle resumed in July.

The major banks responded quickly. ANZ, BNZ, ASB and Kiwibank all increased their floating and variable home loan rates, generally passing on the full 25 basis point increase to borrowers.

Interestingly, this differs from the 2025 easing cycle, when many banks did not pass through the full OCR cuts. This time around, the increase has largely been passed on in full.

Several banks also lifted savings and term deposit rates, although in some cases by less than the full OCR increase.

Why floating rates move almost immediately

Floating mortgages are closely tied to the OCR.

When the Reserve Bank moves the cash rate, banks' short-term funding costs change, and floating mortgage rates typically adjust within days. There is very little mystery behind it.

As a simple example, a borrower with a $500,000 mortgage would pay approximately $1,250 more in interest per year following a 25 basis point increase.

For borrowers on floating rates, OCR announcements matter because they directly affect borrowing costs.

Why fixed rates are different

Fixed mortgage rates operate quite differently.

When a bank offers a one-year, two-year or three-year fixed rate, it is not pricing that loan directly off today's OCR. Instead, it is largely pricing it off wholesale interest rate markets, particularly swap rates.

Swap rates reflect what financial markets expect interest rates to average over a particular period. In other words, fixed rates are driven by expectations of where the OCR is heading, not simply where it sits today.

This distinction is important.

All of the major bank economics teams had already been forecasting a move to 2.75% for weeks. Because markets were expecting the increase, swap rates had largely factored it in before the Reserve Bank made its announcement.

By the time the OCR decision arrived, much of the impact had already been reflected in fixed-rate pricing.

That's why many borrowers refixing their mortgages this month may not have seen any meaningful change in the rates they were offered.

The headline versus the reality

This is where many homeowners get caught out.

The OCR announcement is often treated as the main event, but for fixed-rate borrowers it is frequently old news.

Financial markets spend weeks, and sometimes months, pricing in what they believe the Reserve Bank will do next. As expectations change, swap rates move. Banks then adjust their fixed mortgage pricing accordingly.

By the time the OCR decision is officially announced, the fixed-rate market has often moved well ahead of it.

That means a borrower on a floating rate and a borrower refixing a loan can experience completely different outcomes from the very same OCR decision.

Next time someone tells you "rates just went up," ask: floating or fixed? They're not the same conversation. Floating moves with the OCR. Fixed moves with expectations, and by the time the RBNZ makes its announcement, those expectations are often already priced in.

If your fixed term is coming up for renewal, the more useful conversation isn't about today's OCR number. It's about where the swap curve is heading, and how to structure your loan around it.