Cautious buyers stall NZ housing recovery as rates shift
New Zealand mortgage advisers are operating in a tougher risk‑management environment, with a “hawkish hold” from the Reserve Bank and rising wholesale funding costs pointing to higher mortgage rates and a stalling housing upswing.
Squirrel’s latest NZ property market update notes that while the OCR is still at 2.25%, markets are pricing in multiple hikes over the next year, lifting both borrowing costs and uncertainty for first-home buyers and property investors.
That shift is already visible in wholesale markets. Squirrel reports that wholesale interest rates are now around 0.5 percentage points above pre‑conflict levels, and major banks have begun lifting one‑, two‑ and three‑year fixed mortgage rates by 0.10%–0.20%.
Looking ahead, Squirrel expects mortgage rates to sit closer to 4.75%–5.5% over the next couple of years, rather than the 4.5%–5% range seen earlier in 2026. In this environment, Chief Squirrel, David Cunningham (pictured), said, “The big question for borrowers right now really comes down to: what matters more—certainty or cost?”
ASB’s latest Home Loan Rate Report echoes that shift, flagging renewed “upward pressure on mortgage rates” even though the OCR is well below its 2025 peak. The bank cautions that “it’s not a one-way street for mortgage rates over the next year or two, with several opposing forces at play in the local and global economic environment.” Higher funding costs and mixed signals on the outlook are making rate‑fixing decisions more complex.
Housing recovery stalls as buyers step back
Squirrel’s update argues that hopes of a stronger 2026 rebound have faded, with anecdotal evidence of buyers stepping back amid war‑driven inflation risks and concern about future interest‑rate moves. Best case, house prices are seen as broadly flat this year; more likely, Cunningham says, they have “a bit further to fall”, though not dramatically given how far they have already corrected, a view that aligns with the latest sales and price data.
Fresh REINZ figures underline that tone. National sales in March were virtually unchanged year‑on‑year at 7,853, while the median price slipped just 0.3% to $788,000, suggesting a market ticking over but with no renewed upswing.
Fixing terms and borrowing strategies evolve
For borrowers, the focus is shifting from chasing headline mortgage rates to stress‑testing borrowing capacity and balancing flexibility with protection against further mortgage‑rate rises. Squirrel is seeing more clients split across shorter and longer fixed terms to spread risk rather than aim solely for the lowest initial cost.
Recent survey findings from mortgages.co.nz and Tony Alexander indicate that close to two‑thirds of brokers are now seeing two‑year fixes as the most popular choice among borrowers, highlighting a clear tilt towards medium‑term certainty without committing for too long.
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