Refixes should hold fire until next week

Borrowers with mortgages rolling off fixed terms should hold fire until after next Wednesday's OCR announcement, with banks expected to trim short-term rates once the Reserve Bank delivers a widely anticipated 25 basis point cut.

Brad Luiten, mortgage adviser at Squirrel, says current one-year rates have room to fall.

"I would be waiting until the banks do drop their short-term rates,” Luiten said. “The 4.49% for 12 months is probably a little bit too high, so I see that dropping hopefully down below 4.40%, but only just. So I'd be holding out for another few days until the banks start moving."

Major banks are all forecasting the 26 November cut will bring the Official Cash Rate to 2.25%, marking the bottom of the current easing cycle. ANZ expects the OCR to remain at that level through 2026 before rising again from early 2027.

Short-term wholesale rates are forecast to follow the OCR down, with 90-day rates expected to fall from 2.47% to around 2.30% in the first quarter of next year. The two-year swap rate should drop only slightly further to 2.50% by year end before climbing through 2026 as markets begin pricing in future hikes.

Recovery finally taking shape

ANZ's November Quarterly Economic Outlook noted that the economy is emerging from what felt like "a long cold winter", with conditions now in place for a cyclical recovery.

GDP growth was weaker than expected in the first half of 2025, but chief economist Sharon Zollner attributed much of that to volatility and quirky seasonality. Economic momentum is forecast to pick up, with GDP growth of 2.6% expected for 2026 and 2.8% for 2027.

The labour market appears to have turned a corner. Unemployment reached 5.3% in the September quarter – likely the peak for this cycle, according to ANZ. Job advertisements have started trending upward, and the bank forecasts unemployment falling to 4.5% by December 2026.

Zollner says that while green shoots are visible, "they are also vulnerable, and after a false start earlier this year, firms and households may require some convincing that better economic times are ahead".

House prices have tracked sideways for roughly two years as increased sales activity has been matched by rising listings. ANZ expects national prices to finish 2025 up just 0.5-1%, with significant regional variation.

The outlook is improving for 2026, with lower interest rates and strengthening employment expected to support a 5% lift in prices. Building consents have also started trending upward after two years of flat activity.

ANZ notes that mortgage rates have now fallen to levels where many investment properties can cover their own costs, and affordability constraints have eased. However, debt-to-income restrictions will limit the pace of any housing market upswing.

Longer-term rates heading up

While short-term rates are near their lows, ANZ believes long-term interest rates have already bottomed out. New Zealand 10-year bond yields fell from around 4.5% in early August to near 4% before bouncing back to 4.1% – still only about 30 basis points below where they sat before the RBNZ began cutting last August.

Global factors are keeping a floor under longer-term rates, with central banks in the US and Australia easing by less than the RBNZ and signalling more caution about further cuts. ANZ expects New Zealand long-term rates to rise through 2026 in line with US bond yields.

According to ANZ, the resulting steep yield curve is "a boon for bond investors but a curse for borrowers".