Welcome to our first market update of 2025. With significant changes in both global and local markets, along with some major international developments affecting our economy, there’s plenty to discuss about what’s happening in New Zealand’s property and mortgage landscape.
Want to discuss your specific situation in this changing market? Contact our team for a personalized consultation.
Global Changes Affecting Our Local Market
Let’s start with the biggest news affecting global markets – the recent US trade developments. The implementation of new tariffs on major trading partners is creating waves across global economies, and New Zealand isn’t immune to these effects. With the US imposing hefty tariffs on Canada, Mexico, and China, we’re seeing significant shifts in global trade dynamics.
What’s particularly interesting is how these global shifts are influencing our local mortgage market. While we’re somewhat insulated from direct impacts, the flow-on effects are significant, especially when it comes to interest rates and lending conditions. The strengthening US dollar has implications for our currency, but thankfully, our position with key trading partners helps buffer some of these impacts.
What’s Happening with Interest Rates?
The upcoming Reserve Bank announcement on February 19th is crucial. We’re expecting to see the OCR decrease from 4.25% to 3.75%, which would be a significant move. This continues the downward trend we’ve been seeing, and I believe we’re on track to reach a neutral OCR of around 3% by mid-2025.
For mortgage holders and potential buyers, this is particularly significant. We’re already seeing banks respond – just last week, we saw the first three-year rate below 5% hit the market. While some banks might be hesitant to follow immediately, I expect we’ll see more competitive rates emerge, especially after the next OCR announcement.
Looking to understand how these rate changes affect your mortgage? Let’s discuss your options and find the best strategy for you.
Current Market Advice
If you have a mortgage coming up for renewal in the next few weeks, here’s my advice: consider letting your loan roll onto a floating rate for now. Why? Because we’re expecting to see significant movement in rates following the February OCR announcement, and you’ll want to be in a position to take advantage of these changes.
For those with a bit more time, I’d suggest waiting until early March before making any long-term decisions. By then, we should see the OCR changes flow through to bank rates, giving us a clearer picture of where things are heading. At that point, you might want to consider fixing for a shorter term – six months to a year – while we wait for rates to potentially drop further.
Housing Market Update
Looking at the property market itself, we’re seeing some interesting trends. The market is certainly different from its peak, but this is creating opportunities for different types of buyers. First-home buyers, in particular, are finding more opportunities to enter the market, with less competition and more room for negotiation.
What’s particularly noteworthy is the change in market dynamics. The traditional drivers of house price growth – high immigration levels and rising employment – are currently subdued. However, this doesn’t mean the market is stagnant; rather, it’s adjusting to new conditions and creating different opportunities.
Thinking about entering the property market? Let us help you understand your options in today’s environment.
Dev Dhingra
I've dedicated my career to helping Kiwis achieve their dream of homeownership. As the founder & CEO of Fundmaster, my mission is to transform the mortgage industry and make buying a home more accessible for everyone.