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.
