Refixing tactics shift as borrowers chase last rate cuts
New Zealand mortgage advisers are working in a rare “sweet spot” for buyers, with lower mortgage rates, more stock on the market, and relatively subdued price expectations – but ASB warns the Reserve Bank’s easing cycle is now close to done.
Non‑bank lender First Mortgage Trust is already reporting stronger adviser enquiry and expects competition to intensify in 2026 as lower rates flow through to refinancing and restructuring demand.
ASB’s latest Housing Confidence Survey (covering August to October 2025) shows buying conditions are seen as the most favourable in 15 years, while expectations for further rate cuts and house price growth have both moderated.
ASB senior economist Jane Turner (pictured) said the Reserve Bank’s dovish shift since August has had a clear impact on sentiment.
“The Reserve Bank of New Zealand’s dovish tilt since August influenced house price expectations and interest rate expectations in ASB’s latest housing confidence survey (August – October),” Turner said.
“As the RBNZ communicated a more aggressive easing cycle, respondents correctly anticipated further declines in home loan rates. However, we believe the RBNZ is likely at, or very close to, the end of its easing cycle – we are interested to see how interest rate expectations evolve over the coming months and if that leads to change in re-fixing behaviour from mortgage holders.”
Interest rate expectations: Borrowers still see more cuts
More than half of survey respondents expect home loan rates to keep falling, reflecting the RBNZ’s sharp pivot since August.
Turner noted that rate expectations became “slightly more negative” over the survey period, as RBNZ signalled and then delivered larger‑than‑expected cuts.
“At the August Monetary Policy review, the RBNZ took a dovish pivot and signalled it was likely to cut the OCR by more than it had previously expected," she said. "The RBNZ was concerned the economic recovery was struggling to gain traction and signalled more support from monetary policy was required.
"In October, the RBNZ followed up with an aggressive 50-basis-point-cut to the OCR, cementing the RBNZ’s intent and resulting in market expectations for the terminal OCR to be lowered from 2.5% to 2-2.25%.”
The share of respondents expecting home loan rates to continue falling over the year ahead rose to 54% in the three months to October, up from 47% in the previous survey, and “these expectations proved correct with advertised term mortgage rates falling roughly 40bp from the end of July to the end of October.”
However, Turner emphasised that ASB now sees little scope for further OCR reductions.
“At the time of writing, we believe the OCR is as low as its likely to go in this economic cycle, at 2.25%, although acknowledge the risk of another cut should economic data continue to underperform expectations," she said. "With RBNZ likely at, or very close to, the end of its easing cycle, it will be very interesting to see how interest rate expectations change in the next quarter’s survey – in particular, if respondents continue to expect further declines in home loan rates.”
Re‑fixing behaviour delaying full impact of easing
Turner said expectations of ever‑lower mortgage rates have shaped how borrowers fix and re‑fix their loans – and may have delayed the full transmission of monetary policy to household budgets.
“The expectation of lower interest rates has had an interesting impact on the transmission of monetary policy over the past year,” she said. “Some borrowers have been reluctant to lock in fixed-term mortgage rates on the anticipation that home loan rates will be lower later this year. Instead, they have stayed on floating or fixed for relatively short, but more expensive, term mortgage rates.
“As the economy underperformed expectations this year, this strategy paid off given the declines in mortgage rates we have seen over recent months. But this behaviour has also potentially delayed the full impact of the RBNZ’s monetary stimulus. Only once borrowers are convinced they are at the low point of the current cycle, will they lock in fixed term mortgage rates and the full effect of the RBNZ’s monetary stimulus will flow through to household budgets.”
Good time to buy? Survey says yes
The survey shows buyers see conditions as highly favourable.
“Respondents view now as a good time to buy. Net 28% of respondents felt it now was a good time to buy (three months to October) – the highest level since mid-2010 when the housing market was still in its post-Global Financial Crisis funk,” Turner said.
She pointed to a combination of factors.
“A number of conditions are contributing to positive views on entering the housing market, including relatively high levels of housing inventory, cyclical lows in mortgage rates, and cyclical lows in house prices," the ASB economist said.
"On the other hand, the weak state of the labour market may be contributing to some continued caution from prospective buyers.”
New listings have lifted through spring and are outpacing the modest pickup in demand, pushing total listings (seasonally adjusted) to decade highs and giving buyers more choice and bargaining power.
“With plenty of options on the market, prospective buyers can take their time and remain picky,” Turner said. “Meanwhile, the number of days it takes for a house to sell, as reported by REINZ, remains elevated – the median of days to sell was 45 days in October. This compares to the 2012-2020 period where the number of days to sell averaged 36 days and rarely lifted above 40.
“For potential buyers, the housing market may currently be in a pre-economic recovery sweet spot as we believe housing conditions are likely to become more competitive over the coming year. Mortgage rates are at, or close to, cyclical lows. House prices are stable following the declines seen over 2022. We do expect the market to tighten and for prices to gently lift over 2026.”
Labour market turning from headwind to mild tailwind
Turner said job security concerns have likely held some buyers back over the past two years, as a weaker economy forced employers to trim headcount.
“We believe the labour market is at a turning point, with labour demand now stabilising with employment set to recover over 2026," she said. "Labour earnings growth has lifted and is finally rising at least fast enough to match the pace of inflation.”
House price expectations: Modest and supply‑constrained
House price expectations remain comparatively muted, even with lower rates and stronger buyer sentiment.
“Net 17% of respondents expect that prices will increase over the coming year – down a touch from net 18% in the three months to July,” Turner said.
However, the quarter average masks a small lift late in the period.
“There was a change in tone from the Reserve Bank of New Zealand (RBNZ) in August, and the RBNZ subsequently cut the official cash rate (OCR) by 50 basis points in October. Mortgage rates fell in response to the more aggressive easing approach and the expectation of a lower OCR end point. Subsequently, house price expectations lifted in October relative to August. October also saw a lift in housing market activity with REINZ reporting a 4% seasonally-adjusted lift in turnover.”
Even so, optimism has eased compared with a year ago.
“Nonetheless, optimism that prices will increase has waned over the past year, from a peak of net 33% expecting an increase in prices at the end of 2024 when the RBNZ was at the start of its easing cycle," Turner said. "The RBNZ is now at, or close to, the end of its easing cycle. As a result, interest-rate-induced house price growth has likely come to an end.
“Over the past year, house prices have more or less remained flat. Lower interest rates have stimulated demand. However, the large overhand of supply has kept a lid on house price growth.”
Looking ahead, Turner expects only modest price gains driven by incomes and improving job security, constrained by an ongoing supply overhang.
“We expect growth in labour incomes and increased job security will contribute to stronger housing demand over 2026. Population growth via net immigration will likely remain low by historical standards – but still positive,” she said.
“However, supply has been the dominant factor in the housing market over the past year. There remains a large supply overhang weighing on the market. Rents for new tenancies have declined over the past year, which also suggests an excess supply in the housing market. Population growth should absorb some excess housing stock so long as new housing construction remains modest over the coming year.
"We expect to see modest growth in house prices over the coming year, in line with a broader recovery in household demand. The lift in house prices will likely be mild compared to previous cycles.”
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
