Home loan borrowers can expect rates to fall throughout the rest of this year and next, commentators say.

The Reserve Bank cut the official cash rate by 25bps to 5.25 per cent on Wednesday.

While it's a move that was forecast by several economists, it's a u-turn from the bank's position in May. Infometrics chief executive Brad Olsen describes it as a "WTH moment" and "the biggest flip-flop ever".

Mortgage rates moved within minutes - Kiwibank reduced its variable rates by 25bps, passing on the full cut, and ASB dropped its floating and fixed rates. Its 18-month term dropped by 34 basis points.

BNZ chief economist Mike Jones says there will be ongoing downward pressure on wholesale and retail interest rates.

"Probably the most important implication from the announcement, alongside the OCR itself, was green lighting ongoing steady and potentially aggressive cuts through this year and into next.

"I think they've paved the way pretty well for interest rates to keep falling. It's now regarded as what is needed given the changes to the economy and the inflation outlook that were basically rubber-stamped today."

Brad says it could be that the cut just cemented in the minds of banks and the market that the rate movements of the last couple of weeks had been appropriate. Several banks have shifted their shorter fixed-term rates lower.

"Everyone has been moving ahead, market pricing, the banks following wholesale rates. This locks it in."

But he says Infometrics broadly expects cuts at every meeting through the rest of this year and into next.

Opes Partners economist Ed McKnight says home loan rates will "almost definitely" continue to fall.

He says while OCR cuts have been priced in to wholesale rates already, and some of that has flowed through to borrowers, the Reserve Bank is signalling a substantially lower path for rates.

It now forecasts that the OCR will be below four per cent by the end of next year.

"I expect the wholesale markets to react quickly. But expect to see your mortgage rate come down faster than the OCR does. It's the same that happened when the OCR was rising. Mortgage rates rose faster than the OCR."

NZ Property Investors Federation spokesperson Matt Ball says the move is a sign of "better times ahead".

"Today's small cut will take time to work through the system as many property investors are on fixed rate mortgages. However it is a sign that inflation has been beaten, and it will encourage investors struggling with high costs to stay in the business. Better still, it will encourage investors who have been holding off buying new properties to get back into the market, increasing the number of properties available for rent.

"The main driver for rents is supply and demand, so having more rentals in the market should take pressure off rent increases.

"We hope that there will be more interest rate reductions ahead. Landlords have had an incredibly tough time of it over the last few years as with tax, interest, rates, insurance and maintenance costs all increasing rapidly."

Corelogic chief economist Kelvin Davidson says the cut will probably not mean a lot for the housing market.

The Reserve Bank still expects to see house prices remain flat for another year or so before picking up again.

"In reality, not a lot has probably changed as a result of today's decision and revised economic forecasts. Most people had already been anticipating an easing in monetary policy at some stage soon, and this has now just been confirmed. Indeed, banks have already been lowering mortgage rates for some fixed terms, and this process looks set to continue - which will be a huge relief for many households."

But he says households also have to worry about rising unemployment now - the Reserve Bank is predicting a higher peak, of 5.4 per cent. That will hold back house sales and prices, he sas.

"Debt to income ratio caps will have a similar effect as mortgage rates drop over the medium term.

"Overall, the next phase of monetary policy easing is here, and mortgage rates will drop over the medium term. But the RBNZ was keen to point out that it all still hinges on inflation 'playing nicely', so that's obviously a key factor to keep watching closely."

Brad agrees there's the element of warning.

"The bank does say the pace of further easing will depend on committee confidence that pricing behaviour remains consistent with a lower-inflation environment."

He says it could be that the Reserve Bank came back for its next update in October with a different view.

"Anyone making big bold bets is a brave person at the moment."

-RNZ.