Expert believes a new phase of restraint is on the horizon

Homeowners in New Zealand have welcomed declining mortgage rates in recent months, but economists say there may be limited room for further cuts, with the Reserve Bank of New Zealand (RBNZ) expected to hold the official cash rate (OCR) steady in its upcoming review.
After a year of steady reductions, the OCR now sits at 3.25%. Correspondingly, average mortgage rates have eased—with floating rates at 6.92%, one-year fixed at 5.64%, and two-year fixed at 5.63%.
Despite the relief, Infometrics principal economist Brad Olsen warned that the cycle of falling mortgage rates may have largely run its course.
“We continue to think that mortgage rate cuts have largely run their course,” Olsen told 1News, pointing to limited movement in wholesale interest rates and swaps as signs of reduced flexibility.
According to Olsen, future rate changes will likely be modest and influenced more by banks’ competitiveness than by major monetary policy shifts.
“Banks will likely tweak their rates to be more competitive or remain competitive with what other banks offer, rather than continued further large cuts to interest rates,” he said. “Further OCR cuts or global interest rate declines would be needed to see any more substantial easing in rates.”
Economists at ASB and ANZ both echoed expectations that the RBNZ would pause its cuts in July. ASB noted that inflation is likely to peak at 3.2% in the third quarter, while ANZ cited global uncertainty and inflation expectations as reasons for restraint.
Still, ANZ left open the possibility of future cuts depending on geopolitical developments, including trade tariffs introduced by US president Donald Trump.
Olsen noted that markets are anticipating one more OCR cut before the end of 2025, though Infometrics maintains a conservative forecast.
“At Infometrics, we’re currently sticking to our view that there’s one more OCR cut at some point in 2025, and then that’s the end,” he said.
In the housing market, Olsen said activity remains subdued due to high property stock levels and slower population growth.
“There’s just too many sellers and too few buyers at present,” he noted, adding that lower interest rates may gradually spur more transactions, but any price gains will likely be slow.
With households shifting toward longer-term mortgage fixes, Olsen said Kiwis are prioritising stability amid economic uncertainty.
The next OCR announcement is scheduled for Wednesday, July 9.