The Official Cash Rate (OCR) is the interest rate that the Reserve Bank of New Zealand (RBNZ) uses to implement its monetary policy. It is the rate at which banks can borrow or lend overnight funds with the RBNZ.

The RBNZ sets the OCR at a level that it believes will achieve its policy objectives, which include maintaining price stability (low and stable inflation) and supporting maximum sustainable employment. The RBNZ reviews the OCR regularly and adjusts it if necessary.

The OCR can go up or down depending on a variety of economic conditions and factors. For example, if the economy is growing too quickly and there is a risk of inflation becoming too high, the RBNZ may decide to increase the OCR to cool down the economy and bring inflation back to its target range. On the other hand, if the economy is slowing down and there is a risk of deflation (falling prices), the RBNZ may decide to decrease the OCR to stimulate economic activity and support maximum sustainable employment.

The OCR affects the interest rates that banks and financial institutions offer on their loans and deposits. When the OCR is low, banks and financial institutions may reduce the interest rates they charge on loans, such as mortgages, to encourage borrowing. On the other hand, when the OCR is high, banks and financial institutions may increase the interest rates they charge on loans to discourage borrowing and cool down the economy.

Therefore, the OCR can have a significant impact on the interest rate you pay on your mortgage. If the OCR is low, you may be able to secure a lower mortgage rate, which could save you money on your monthly mortgage payments. Conversely, if the OCR is high, you may have to pay a higher mortgage rate, which could increase your monthly mortgage payments.

It's important to note that the OCR is just one factor that determines mortgage rates. Other factors include the lender's risk appetite and funding costs, as well as competition in the market.

In summary, the OCR is a key interest rate set by the RBNZ that can affect the interest rate you pay on your mortgage. The RBNZ may adjust the OCR up or down in response to changing economic conditions and to achieve its policy objectives. By maintaining price stability and supporting maximum sustainable employment, the OCR helps to create a stable economic environment that can ultimately benefit mortgage borrowers.