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NZ interest rate predictions: 2024 & 2025
We’ve rounded up NZ mortgage rates forecasts from economists & experts.
Last updated: 2 May 2024
The last few years have been an interest rate rollercoaster. They were at their lowest point in history in late 2021 – then, by2023, rates climbed to a 15+ year high, and now they’re heading back down again (phew!).
To help you plan for the future, we’ve gathered NZ interest rate predictions from leading economists and government agencies.
NZ mortgage interest rates forecast 2024 & 2025
1 year fixed rate forecasts & OCR
ANZ
ANZ’s September 2024 Property Focus report predicts that one year fixed mortgage rates will continue their decline in 2024, then slowly decline to 5.2% in December 2025. The bank’s breakeven analysis suggests that:
“With larger falls in store, we think it still makes sense to consider fixing for a shorter period, even though it costs a little more now, to save more money later.”
Following the recent OCR cut, ANZ has already cut their advertised one year rate (to 6.19%) and if another cut is on its way, their interest rates may end up lower than expected in late 2024.
ASB
ASB’s August 2024 Home Loan Rate Report predicts that one year fixed home loan rates should decrease in the next 12 months, with one year rates seeing the biggest drops (from around 6.3% in August 2024 to 5.3% in August 2025). Rates will fall further from there with one and two year rates falling the fastest.
Kiwibank
Kiwibank head economist Jarrod Kerr forecasts that interest rates will decrease considerably over the next year after the Reserve Bank cut the OCR. Here’s what he said in August 2024 to journalist Bernard Hickey about the OCR and interest rate cuts:
“Neutral according to the RB is 2.75, so that means cutting from 5.5 to at least 2.75. We think they’re going to 2.5. That’s 300 basis points of rate cuts coming over the next year and a half.”
“Interest rates may have fallen today and tomorrow but they have a lot further to go over the next year or so.”
Westpac
In their August 2024 Economic Update, Westpac’s NZ mortgage rate prediction was that rates will continue falling throughout 2025. They didn’t provide detail on the scale of the cuts but indicated that the OCR would reach 4% by 2025.
BNZ
In their April 2024 Interest Rate Research paper, BNZ has forecasted that the OCR will decrease from 5.5% (the current rate) to 3% by Q 2025. If this happens, mortgage interest rates may follow a broadly similar trend, falling by 2.0 to 2.5% in the one to two years.
Interest rates may be headed down in the mid to long term.
CoreLogic
CoreLogic’s Chief Economist Kelvin Davidson told Newshub that there’s almost no chance of interest rate increases in 2024, but rates should start declining soon and stabilise around 5.5% in 2025.
Squirrel Mortgages
David Cunningham, Chief Executive at mortgage advice firm Squirrel, forecasts that one year rates could drop below 6% by the end of 2024 and below 5% by late 2025.
Opes Partners
Property advisors and economists Opes Partners predict that one year fixed rates will average 5.5% in July 2025 and 5.0% in July 2026.
Where’s the OCR headed?
In its October review, the Reserve Bank cut the OCR by 0.5% to 4.75%. They haven't released an October forecast, but in August they indicated that the OCR could reach 4% by late 2024/early 2025, meaning we could be in store for one more rate cut in November this year.
This cut will almost certainly be either 0.25%, 0.5% or 0.75%, barring any surprises (with 0.5% being most likely). Economists from ANZ, Westpac, HSBC and ASB have predicted a 0.5% cut, while Infometrics principal economist Brad Olsen said:
“We think there’s real potential for the RBNZ to consider a 75bp cut in November, to maintain the faster pace of easing…”
Next year, economists predict slower, steadier cuts continuing until the OCR hits somewhere between 2.75% and 3.5% in late 2025/early 2026.
Interest rates have a huge affect on house prices in NZ.
How long should I fix for?
Long term interest rates of two to five years are currently lower than six month and one year rates. This indicates that banks expect interest rates to continue falling in the next year or two.
If you fix for a shorter term, such as one year, you may have a slightly higher rate right now, but you’ll be better prepared to take advantage when or if interest rates decrease in the next year.
If you fix for 2+ years, you’ll lock in a lower rate but you may not be able to benefit right away if interest rates decrease.
Another option that many mortgage brokers and economists suggest is to break your mortgage into portions. You could, for example, have half on a one-year fixed rate and half on a two-year fixed rate. This would give you some of the benefit of lower long term rates, but still allow you the opportunity to take advantage if interest rates are lower in a year.
Unfortunately, even New Zealand’s sharpest economists can’t tell you what’s right for your mortgage, or where interest rates will be in the future (with total certainty). That’s why you should always structure your mortgage in a way that suits you. If you value security and certainty those longer rates may be attractive. If you’re willing to gamble that rates will be much lower in a year, it may be worth choosing shorter term rates.
Most importantly, it’s always a good idea to get professional advice. Speak to a mortgage broker or financial advisor and they’ll be able to help you structure your mortgage in a way that’s tailored to you and your financial situation.
DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute a financial advice service. The article is only intended to provide education about the New Zealand mortgages and home loans sector. Nothing in this article constitutes a recommendation that any strategy, loan type or mortgage-related service is suitable for any specific person. We cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you. Before making financial decisions, we highly recommend you seek professional advice.
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