Mortgage interest rate history NZ: How do today’s rates compare?

• Floating: 6.11%
• One year: 5.22%
• Two year: 5.65%
• Three year: 5.81%

As you can see, rates now are actually relatively low compared to the last 20 years or so, and they’re much lower than they were from 2005 to 2008.  That said, there were two major events during the 2005 to 2026 time period that had a huge effect on interest rates.

As you can see, rates now are actually relatively low compared to the last 20 years or so, and they’re much lower than they were from 2005 to 2008.  That said, there were two major events during the 2005 to 2026 time period that had a huge effect on interest rates.

The 2008 Financial crisis was caused by the collapse of the US housing market, which occurred because of risks taken by financial institutions (in other words, dodgy lending). Interest rates in New Zealand were high at the time to combat inflation, peaking at 10.72% floating on average.

The Reserve Bank was worried about a recession as a result of the crisis (which did occur) so they cut the OCR quickly, and mortgage interest rates fell to below 6% floating. They remained at roughly those levels until 2020 (and we all know what happened next).

COVID hit the NZ economy hard from 2020 onward. First the Reserve Bank cut the OCR to a record low of 0.25% to cushion the economic shock of the pandemic, and the average one year fixed rate approached 3% (some were under). Then inflation reared its head, caused by increased government spending, supply chain tensions, the Ukraine War, and labour shortages.

It peaked at 7.3%, but by then the Reserve Bank had already started increasing the OCR – from 0.25% to 5.5% between October 2021 and mid 2023. This caused a one-two punch of house price rises followed by rapid interest rate increases. Yuck.

In early 2026 inflation in NZ was already on the rise thanks mainly to increasing energy prices and global uncertainty. Then the Iran War began. The blockage of the Strait of Hormuz has caused price spikes for oil and diesel – which could increase the price of everything, and therefore increase inflation. The response is likely to include OCR increases, and interest rate rises - but only time will tell. 

Read our interest rate predictions for 2026 and 2027

Interest rates were capped by the government during this period, which kept them artificially low – similar to 2026 levels from around 6.5% to 8% (see chart above).

Conflicts in the middle east caused major global energy shocks in 1973, leading to a lethal combo of inflation and slow economic growth. Reserve Banks around the world (including in NZ) hiked interest rates rapidly as a response. An Iran-Iraq war in 1979 led to another oil crisis, which caused more inflation. Reserve Banks again responded by increasing interest rates. Yikes.

Prime Minister Robert Muldoon froze prices and wages to stop inflation in its tracks (against the advice of the Reserve Bank). Despite that during this period, interest rates continued to rise thanks to government spending, and the unintentional effects of those freezes.

Muldoon was heavy on regulation and control but the next government's finance minister, Roger Douglas, was the opposite. Among many other things, he removed many of Muldoon’s controls, and pent up demand caused inflation and prices to skyrocket (along with interest rates).

The stock market crashed by 60% on October 20 1987, Black Monday, which plunged New Zealand (and most of the world) into recession. NZ was hit harder than most other countries – our floating mortgage rates reached above 20% and inflation was 18.9%.

Interest rates decreased, easing pressure on households, and the economy slowly recovered. By October 1988 interest rates were around 15% (phew), then in 1990 they fell steadily and were below 8% by late 1993, and remained around 8-10.5% until 1998.

Things were starting to look pretty positive here in NZ, and mortgage interest rates, although still high-ish, were at least steady. Then a financial crisis, starting in Thailand, spread throughout Asia and hurt the world economy (including NZ). Combined with a summer drought, this was enough to plunge NZ into another recession and cause an increase in interest rates.

One good thing came out of this though – the OCR regime was introduced in March 1999, with the OCR set initially at 4.5%. NZ's modern monetary policy framework was born. That same year the average floating rate fell to just 6.50%. Nice.

Things were chill for Kiwi mortgage holders from 2000 to 2004. We’d recovered from the Asian financial crisis, interest rates were low (around 6-8% floating average), and the economy was growing steadily. Then house prices started to increase, along with consumer debt, and inflation – so the Reserve Bank hiked the OCR and interest rates quickly.

Average floating interest rates hit a high of around 10.90%, then the Global Financial Crisis hit (see above).