New report points to major change in the mortgage market
It’s time for borrowers to have a plan – and opportunities beckon for mortgage advisers to provide life-changing advice.
As New Zealand’s interest rate environment shifts, ASB economists say home loan rates for many terms may now be near their cyclical lows, prompting a critical moment for mortgage holders and homebuyers alike.
Following successive cuts, the Reserve Bank of New Zealand (RBNZ) has brought the Official Cash Rate (OCR) down from 5.50% in August 2024 to 3.25% by July 2025. ASB’s latest Home Loan Rate Report suggests that the central bank may ease the OCR further this year, though any action is expected to be cautious.
“The popular fixed rates between one and two years have been in focus,” the report stated, noting that these terms are now up to 2.6 percentage points below their peaks in 2022 and 2023. Competition among banks and evolving expectations in global financial markets are also contributing to the downward pressure.
ASB senior economist Chris Tennent-Brown said volatility remains a risk. “It’s not all about trying to time things to fix at the lowest fixed rate,” he wrote. “Borrowers need to balance their needs for flexibility, repayment timeframes, the cost of floating vs. fixing, and other personal needs whilst trying to minimise the cost of borrowing.”
As of July 2025, the one- and two-year fixed mortgage rates have declined to 4.89% and 4.95%, respectively. However, floating rates and short-term six-month fixes remain elevated, with the floating rate at 6.44%.
While there is some bias for short-term rates to decline slightly further, the bank warns that longer-term rates may not fall as much and could even increase if inflation pressures persist. “The fixed terms beyond two years could stay near current levels or potentially increase,” the report said.
ASB advises tailoring mortgage strategies to borrowers’ circumstances, taking into account budget, tolerance for interest rate changes, and the need for flexibility. “Ultimately, it is a trade-off,” the report highlighted.
Mortgage advisers are now seen as playing a key role in guiding borrowers through these complex trade-offs.
It’s time for borrowers to have a plan – and opportunities beckon for mortgage advisers to provide life-changing advice.
As New Zealand’s interest rate environment shifts, ASB economists say home loan rates for many terms may now be near their cyclical lows, prompting a critical moment for mortgage holders and homebuyers alike.
Following successive cuts, the Reserve Bank of New Zealand (RBNZ) has brought the Official Cash Rate (OCR) down from 5.50% in August 2024 to 3.25% by July 2025. ASB’s latest Home Loan Rate Report suggests that the central bank may ease the OCR further this year, though any action is expected to be cautious.
“The popular fixed rates between one and two years have been in focus,” the report stated, noting that these terms are now up to 2.6 percentage points below their peaks in 2022 and 2023. Competition among banks and evolving expectations in global financial markets are also contributing to the downward pressure.
ASB senior economist Chris Tennent-Brown said volatility remains a risk. “It’s not all about trying to time things to fix at the lowest fixed rate,” he wrote. “Borrowers need to balance their needs for flexibility, repayment timeframes, the cost of floating vs. fixing, and other personal needs whilst trying to minimise the cost of borrowing.”
As of July 2025, the one- and two-year fixed mortgage rates have declined to 4.89% and 4.95%, respectively. However, floating rates and short-term six-month fixes remain elevated, with the floating rate at 6.44%.
While there is some bias for short-term rates to decline slightly further, the bank warns that longer-term rates may not fall as much and could even increase if inflation pressures persist. “The fixed terms beyond two years could stay near current levels or potentially increase,” the report said.
ASB advises tailoring mortgage strategies to borrowers’ circumstances, taking into account budget, tolerance for interest rate changes, and the need for flexibility. “Ultimately, it is a trade-off,” the report highlighted.
Mortgage advisers are now seen as playing a key role in guiding borrowers through these complex trade-offs.
