The Reserve Bank’s next move could reshape the mortgage market
New Zealand homeowners are closely watching as the Reserve Bank prepares to
announce its next Official Cash Rate (OCR) decision this Wednesday.
After several years of stability, interest rates have now fallen to their lowest point in more
than three years, and economists believe further drops are likely.
Some analysts expect that if the economy continues to struggle, one-year fixed mortgage
rates could reach 3.99% by early 2026 — down from the current average of 4.49%.
What’s driving this outlook?
The Reserve Bank is expected to cut the OCR in response to slow economic activity and
weak consumer spending.
Currently sitting at 3%, forecasts suggest it could be lowered by 0.25% or even 0.5% this
week.
A deeper cut would lower borrowing costs across the economy — and banks have already
moved in anticipation.
This week, ANZ, ASB, BNZ, and Westpac all reduced their one-year fixed rates to around
4.49%, reflecting confidence that monetary policy will continue to ease.
What the experts are saying
● Nick Tuffley (ASB) has urged the Reserve Bank to “hit the gas harder” to stimulate
the economy, predicting that the OCR could drop to 2.25% before Christmas.
● Kelly Eckhold (Westpac) expects a 0.5% cut this week and believes there may be
more rate reductions early next year if the economy stays weak.
However, he cautions that an OCR below 2.5% would be “stimulatory” and
temporary, as the neutral rate is likely between 3% and 3.15%.
What this means for borrowers
For homeowners and first-home buyers alike, these shifts could be game-changing.
✅ Short-term flexibility:
Many borrowers are opting for 6–12 month terms or split loans to stay adaptable as rates
continue to move.
✅ Potential savings:
If rates fall to 3.99%, a borrower with a $600,000 mortgage could save hundreds of dollars
each month — but fixing too soon could mean missing further reductions.
✅ Market activity:
Lower rates could draw more first-home buyers into the market, boosting overall
confidence and demand in 2025.
Why patience might pay off
Timing the lowest point in interest rates is never easy. While cheaper rates are on the
horizon, experts agree that the OCR won’t stay low forever.
Once growth picks up, rates will gradually move back toward neutral territory.
That’s why reviewing your loan structure, term length, and refinance options with a
mortgage adviser now can help you stay ahead — and save when rates shift again.
Final Thoughts
With the Reserve Bank’s decision just around the corner, this could be a pivotal moment for
mortgage holders across New Zealand. Even a small OCR change can affect borrowing power, repayments, and investment plans.
At Fundmaster, we’re tracking every update to help you lock in the right rate at the right
time.
📞 Book your free mortgage review today and make sure your strategy aligns with where
the market is headed.
