ASB warns New Zealand mortgage rates may have passed their low point
ASB’s latest report suggests it’s time for advisers to reassess client loan structures, as the bank indicates the run of falling mortgage rates may have ended despite the Reserve Bank keeping the official cash rate (OCR) on hold.
ASB’s latest Home Loan Rate Report, released following RBNZ’s 18 February decision to hold the OCR at 2.25%, notes that the cash rate was cut to this level from a 5.5% peak at the final meeting of 2025, yet fixed mortgage rates have recently nudged higher as markets start to anticipate future tightening.
Chris Tennent-Brown, ASB senior economist, says RBNZ “will begin tightening the OCR later this year” as inflation stays above target and the economy shows signs of recovery. That shift in outlook has already fed into wholesale interest rates and, in turn, retail mortgage pricing.
OCR on hold, but mortgage costs shift
The bank stresses that rate markets are highly changeable, reiterating that “interest rate markets are volatile and can change quickly.” That volatility can quickly flow through to mortgage rates, making it critical for households to have a clear plan rather than reacting to each move.
Shorter-term fixed rates and floating loans are expected to hover near current levels through the first half of 2026 before edging higher as economic conditions improve. Longer-term fixed rates, from one year and beyond, are now “under upward pressure,” influenced by both RBNZ signals and overseas central bank moves, including the Reserve Bank of Australia’s recent hikes.
ASB highlights that financial markets are now pricing in the chance that “the next move from the RBNZ could be a hike,” contributing to higher wholesale rates and lifting term mortgage and deposit rates from their 2025 lows.
Refix conversations: from “how low?” to “was that the low?”
Advisers are now dealing with a shift in client mindset. For borrowers, the key question has moved from whether rates can go lower to whether “the low point for mortgage rates [is] behind us?” Floating remains “a relatively expensive place to be borrowing,” while many popular fixed terms appear to be at or beyond their cyclical trough.
With ASB expecting mortgage rates to settle well above the ultra‑low levels seen during COVID‑19, advisers should focus on helping clients lock in strategies that fit their budgets, risk tolerance and need for certainty, rather than trying to perfectly time the rate cycle.
Structuring advice in a higher‑for‑longer world
ASB’s report reinforces that it’s “not all about nabbing the lowest fixed rate.” Advisers need to weigh flexibility, repayment timeframes, the trade‑off between floating and fixing, and regulatory overlays such as LVRs and newly activated DTI restrictions when shaping recommendations.
With RBNZ expected to keep the OCR on hold in the near term before increases in late 2026 and 2027, ASB sees a bias for both shorter‑ and longer‑term mortgage rates to move higher from here, especially now that “the wholesale interest rates that influence term mortgage rates for one-year terms and onwards are past their lows for the easing cycle.”
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