In my last post in November, I said that fixed rates should begin to rise around the middle of 2026. In fact this rise in rates arrived 6 months early and began in December! Not much of a Christmas present. Fortunately yesterday's RBNZ rate announcement has been met with a calmer response.
The 1 year rate remains at its low of 4.49% while the 2 year plus rates have risen slightly. This is a clear signal that the fall in rates is over and the expectation is that they will rise from here. Despite this small rise, in my view the 2 and 3 year rates are still good value and so fixing longer remains the best option.
The good news is that the experts are not expecting a return to the very high rates of a few years ago. They were a response to the high inflation caused by the Covid crisis and there should be no repeat this time around.
A broad range of economic indicators show that the NZ economy is in the early stages of a recovery. And concerns about inflation remain - power bills and council rates being key contributors. Inflation is also a concern in Australia and the US. They have interest rates well above our own - its usually the other way around.
First home buyers are continuing to take advantage of the lower interest rates and relatively stable house prices by buying in record numbers. Some property investors are active but are finding it harder to attract and retain good tenants. Existing home owners (i.e. movers) are holding off that move to a new home, perhaps concerned about job security.
Although house prices have been flat over several years now, the volume of house sales (and purchases) has gradually risen. Total listings (for sale) remains above average but is well below 12 months ago. The market is gradually moving from a "buyers market" to one that is more balanced. A modest rise in house prices is still expected for this year, but it may depend on which city you are in.
If you are thinking of switching banks then a number of banks are offering a potentially large upfront cash incentive payment, but there are some key conditions to be considered first.
My above comments are general, but please do not hesitate to get in touch to discuss your own situation in more detail. And if family or friends need advice on a new or existing mortgage, they are welcome to give me a call.
The story of 2025 has been one of falling interest rates. Its generally been a great year for the primary sector and rural economy. But the expected recovery for the wider economy, especially Auckland and Wellington, has not arrived.
And so we look ahead to 2026 and what it might hold. The consensus seems to be that the strength of the rural economy will eventually flow through to Auckland and Wellington. Or in other words the wider economic recovery has been delayed but not cancelled altogether.
The lower interest rates should encourage spending by consumers and investment by business. And flow through to employees feeling more secure in their jobs. Confidence should lead to more consistent economic growth. Eventually this will impact the housing markets in the main centres.
The banks are projecting house price growth of approx. 5% in 2026. The high volume of current listings for sale suggest that any price increases may be later in the year. And Auckland and Wellington house prices may continue to lag other parts of the country.
So what does this mean for interest rates? It means that the fall in rates has largely run its course. A further 0.25% cut in the OCR is expected on November 26th and perhaps one further cut early next year. But for most of 2026 the OCR is expected to remain largely unchanged. By mid 2026 the fixed rates are expected to begin rising in anticipation of some OCR increases in 2027. And so now is the time to fix for longer. Its important to note that the recovery is expected to be mild and its unlikely we'll see a return to the high rates of the last peak in the next few years.
And if you are thinking of switching banks then now would be a good time. A number of banks are offering potentially large upfront cash incentive payments, but there are some key conditions to be considered first.
My above comments are general, but please do not hesitate to get in touch to discuss your own situation in more detail. And if family or friends need advice on a new or existing mortgage, they are welcome to give me a call.
Best wishes and safe travel for the coming Christmas and New Year holidays.
Last month the RBNZ cut the OCR to 3% as expected and the 1 and 2 year fixed mortgage rates now sit at around 4.75% and the 3 year rate at 4.95%.
The projections from the RBNZ indicate there is at least one, probably two more cuts to come. Hopefully the first will arrive on October 8th and deliver a 1 year rate close to 4.50%. But this cut may not flow thru so much to the 2 and 3 year rates as we are probably nearing the bottom of the cycle.
Unfortunately rates are not expected to fall to the pre-Covid levels of 2017 to 2019. Inflation is down but is far from dead. In NZ prices for food, power, rates and insurance continue to rise. In the US tariffs & tax cuts are keeping rates up and the US government is borrowing heavily to fund its deficit.
Meanwhile the NZ economy is operating at 2 different speeds. Rural NZ is booming with high prices across many primary commodities such as dairy, beef and lamb. But the main centres are not yet booming with Auckland unemployment well above the national average. Urban consumers remain cautious despite the large fall in mortgage rates and immigration is low. However many believe that in 2026 the rural boom will spread to the cities.
All of the above points to fixed mortgage rates not staying at the bottom of the cycle for long. And so now is the time to consider fixing for longer – i.e. at least 2 or even 3 years. Ideally your mortgage will be split into 2 or 3 parts so you can have a mix of expiry dates.
Auckland & Wellington house prices are down slightly over winter as it continues to be a buyers market with plenty of listings. Existing home owners are holding back and first home buyers are taking advantage of this. Investors have begun their return to the market after an absence of several years.
Please do not hesitate to get in touch to discuss your own situation. And if family or friends need advice on a new or existing mortgage, they are welcome to give me a call.
Economics has long been known as "The Dismal Science" but currently it is anything but dull thanks to Trump.
Short term fixed rates continue to fall, albeit at a slower pace. The one year rate now sits at 4.99%. However the longer fixed rates have stalled with the 3 year plus rates remaining well over 5%. A major cause of this is events overseas where NZ banks borrow some of their funds. Because while NZ has inflation very much under control the same can not be said for the US. There is real concern that tariffs will increase inflation in the US and that US interest rates will need to remain high.
However the tariffs that Trump announced last month were higher and wider than expected. If implemented they could cause a global recession as international trade is reduced. Such a recession should tend to reduce inflation pressures and hence reduce interest rates as well. Thankfully in recent days the US and China have agreed reduced tariffs.
But just the uncertainty alone that Trump is causing will slow business investment as they wait to see the results of his actions. This in turn should reduce inflation and rates and could see lower mortgage rates both overseas and here. It would of course have consequences for the NZ economy and unemployment as well.
There seems little doubt that the 6 and 12 month rates will go lower and probably the 18 month rate as well. However its not clear how much further the 2, 3 and 5 year rates will fall. Some economists do not see these rates falling much further, but with Trump in The White House its hard to know!
The next RBNZ rate announcement is about a fortnight away on May 28th and will probably bring a further 0.25% cut in the OCR. Hopefully that will feed through to the 6 and 12 month rates, perhaps the 2 year rate as well. And over the next 6 months we will be looking to see where the interest rate cycle bottoms out and especially how those longer rates react to events both here in NZ and overseas.
Please do not hesitate to get in touch to discuss your own situation. And if family or friends need advice on a new or existing mortgage, they are welcome to give me a call.
As expected the RBNZ cut the OCR by 0.50% on Wednesday this week.
They also signaled further smaller cuts to come of 0.25% each, probably in April and May.
While the 6 month mortgage rate remains close to 6%, ANZ have now cut their 1 year rate to 5.29% and their 2 year rate to 4.99% and it seems likely that the other banks will follow suit. The 6 and 12 month rates will no doubt fall further, but the future path of the longer term rates is less certain.
The 3 to 5 year rates appear to have stopped falling and remain close to 5.50%. This is despite the NZ economy continuing to struggle with rising unemployment and little or no growth.
The concerns about inflation in the medium to long term seem driven by both local and overseas factors. Trump's introduction of tariffs is certainly inflationary and he has also proposed tax cuts as well. Locally many are predicting a rapid recovery of the NZ economy and also that NZ businesses will use this recovery as an opportunity to raise their prices.
Some are already recommending a return to fixing longer term. Personally I think it wise to wait a little longer to see how things play out. But there is no question that the future path of mortgage rates is now less certain than its been for a while.
Please do not hesitate to get in touch to discuss your own situation. And if family or friends need advice on a new or existing mortgage, they are welcome to give me a call.
Thanks to the 0.50% OCR cut by the RBNZ in early October, rates are now well and truly on their way down. And the expectation is that there will be a further cut of 0.50% later this month. There was talk of it being even more than 0.50%, but Trump’s election and better than expected employment figures seemed to have made this unlikely.
The 1 year fixed mortgage rate is already below 6%. So a further fall to around 5.50% seems not far away. And a 1 year rate of around 5% seems likely as early as the middle of next year.
Some argue it will go below this level. Jarrod Kerr at Kiwibank sees the RBNZ cutting the OCR all the way to 2.50%. This would imply a 1 year mortgage rate of around just 4%. However that is by no means certain with others predicting the cuts to stop at an OCR of 3.00% to 3.50%. So I’d budget on a mortgage rate of say 5% for now, but there is potential for it to go lower.
As you would expect, investors are beginning to return to the market and home buyers will begin to face more competition. Its pleasing to see that first home buyers have used the recent absence of investors to their advantage. For the first time in decades home ownership in NZ has actually increased – its slowly but surely been in decline for 30 years. This is perhaps surprising given the high interest rates, but surely good news for the financial well-being of NZers.
Please do not hesitate to get in touch with any questions or concerns. And if family or friends need advice on a new or existing mortgage, then they are welcome to get in touch.
The Official Cash Rate (OCR) cut by the RBNZ on August 14th has at last seen the start of significant mortgage rate cuts. The OCR cut was only 0.25% but has triggered around a 0.50% fall in mortgage rates due to expectations of further rate cuts to come. The 1 year rate is now around 6.5% rather than 7%.
The RBNZ has also signalled further cuts to come, and so the question now is how far and how fast.
ANZ are now projecting a 1 year fixed rate of 5.3% by June 2025, a further 1.20% drop in just 9 months. This is much faster than earlier projected and due to the poor state and outlook of the NZ economy. And so by the 2nd half of 2025 we could be re-fixing at rates close to 5%. Hopefully there will be further drops, but these will probably be much slower.
Keep in mind that these are only projections and that the timing of the actual cuts will depend on how factors such as the rate of inflation pan out over this time. Please also keep in mind that it will take time for borrowers to benefit from these new rates as loans roll off their existing fixed rates over the next 12 months. The 6 month rate remains high at 6.85% and the floating rate remains much higher at around 8%.
The lower rates will encourage buyers to return to the housing market, both home buyers and investors. So it is likely that house prices will soon start to rise. However the speed of any rises will be constrained by a number of factors such as a weak economy, falling migration and a larger construction sector ready to respond to any increase in demand. As always please feel free to get in touch with any mortgage related questions. Bring on the warmer weather.
Times are tough for NZ borrowers, with mortgage rates remaining at their peak of around 7%.
And there is no clear sign yet of a fall in rates.
But there is some good news for home owners.
House prices seemed to have stopped falling and some are predicting a sharp turnaround.
The key drivers of this change appear to be the following,
Unemployment remains relatively low Salaries and wages have increased as employers look to retain staff Immigration has bounced back to record high levels Interest rates remain high but have probably peaked with inflation now falling With interest rates so high, you could be forgiven for assuming that house prices will remain flat for the near future.
However some experts now believe that the above factors will be enough to see a full reversal, with house prices actually starting to rise.
So given all of the above, now is probably a good time for first home buyers to jump on the property ladder.
But unfortunately it looks like it will be next year before we see any fall in mortgage rates.
