How Low Will Mortgage Rates Go in 2025?

Between November 2021 and May 2023, the Reserve Bank (RBNZ) lifted the Official Cash Rate (OCR) from its all-time low of 0.25% to 5.50% – a level not seen since before the GFC, in 2008.

As a result, these increases in the cost of borrowing flowed through to mortgage rates. In August 2021, the average one-year fixed rate for owner-occupiers on Canstar’s mortgage database was 2.58%. And by January 2024, it was 7.5%.

But, thankfully, peak mortgage pain has passed. Since last August, the RBNZ has cut the OCR six times, from 5.5% to 3.25%, and banks have reduced their mortgage rates.

At time of writing (06/06/25), the average one-year fixed rate on Canstar’s database is 5.04%, and over the past 12 months average fixed rates across one to three years have dropped around 170 basis points (bps).

But whereto from here? When it made its most recent cut to the OCR, on May 28, the RBNZ also revised its projections, suggesting another 40bps of cuts, to a low of 2.85% for most of next year.

RBNZ OCR Forecast

So given the RBNZ’s forecast of further OCR cuts, and the continuing global economic uncertainty, what are the major banks predicating for the OCR and mortgage rates over the coming months? Let’s take a look.

Below are synopses of the major banks’ outlooks. Click on each bank’s name to jump to a more detailed overview of its predictions. And click here to see where, historically, mortgage rates have sat in relation to the OCR.

• ANZ: Expects more cuts to the OCR to take it to a low of 2.5% by October, where it will remain until the end of 2026. Says wholesale and market rates have a little further to fall, but from there the only way is up, and that homeowners should start to consider longer-term rates.
• ASB: Predicts the RBNZ will make two more cuts over the remainder of the year to take the OCR to 2.75%, although the RBNZ might stagger the timing. For those with mortgages it says that floating or fixing for the six-month term is an expensive place to be borrowing if you’re waiting for lower long-term rates, because they’re not likely to fall much further and could start to rise by the end of the year.
• BNZ: Is sticking with its forecast that the OCR will hit a low of 2.75% by the end of the year. This means that longer-term fixed mortgage rates have already bottomed out. Only shorter-term rates – six-month and one-year fixed mortgage rates – are likely to dip lower, into the 4.50-5.0% range.
• Kiwibank: Thinks the RNBZ needs to cut the OCR to 2.5% by the end of the year, due to the weak economy. If that happens, says wholesale and retail rates have further to fall. However, if the RBNZ doesn’t cut that low, and sticks at 2.75%, mortgage rates aren’t likely to rise, and will remain static for quite a while.
• Westpac: OCR to bottom out at 3% in August. As a result, longer-term rates now pretty much as low as they’re going to go. Short-term mortgage rates still have a little way to fall, but fixing shorter than a year is a bet that the OCR is going to go sub-2.75%, which Westpac thinks is unlikely.

Lowest Mortgage Rates for Refinancing

Looking to refinance your mortgage? The table below displays some of the one-year fixed-rate home loans on our database (some may have links to lenders’ websites) that are available for home owners looking to refinance. This table is sorted by current interest rates (lowest to highest), followed by company name (alphabetical). Products shown are principal and interest home loans available for a loan amount of $500K in Auckland. Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loan selector to view a wider range of home loan products. Canstar may earn a fee for referrals.

Compare Lowest Home Loan Rates for Refinancing

ANZ

Due to the country’s stop-start economic recovery, the US’s trade policies and uncertainty around global growth, the ANZ predicts two more OCR cuts this year (in August and October) taking it to a low of 2.5%, where it will remain until the end of 2026, when it will move back up to a neutral level of 3%.

ANZ OCR Forecast May 2025

As a result, ANZ thinks that we’re nearing the low point in the interest rate cycle, and that wholesale rates will bottom out around the end of the year.

Because we’re nearing the bottom of the rate cycle, ANZ says that locking in for longer 2- and 3-year terms is becoming a good idea, because once they bottom out the only way is up.

But it notes that for people who are considering holding out for interest rates to hit rock bottom, currently, fixing for six months is a lot cheaper option than choosing a floating rate.

ANZ Projected Special Interest Rates as of May 2025

Source: RBNZ, ANZ Research

ASB

The ASB predicts the RBNZ will make two more cuts over the remainder of the year to take the OCR to 2.75%, although the RBNZ might stagger the timing.

For those with mortgages it says that it’s a question of “a bird in the hand or two in the bush”?

The bank says that, based on its economic forecasts: “floating or fixing for the shortest six-month term is an expensive place to be borrowing, while some of the fixed terms are now at or near the lows we expect”.

So, if you’ve a mortgage, do you take advantage of already low long-term rates, which could start to rise by the end of the year? Or do you take a punt on a shorter-term rate hoping that longer-term rates dip slightly lower, which they might not?

ASB OCR Forecast May 2025

Searching for the Cheapest Personal Loan?

If you’re looking for the cheapest personal loan, Canstar’s personal loan comparison tables can help. The table below displays the sponsored unsecured personal loan products available on Canstar’s database for a three-year loan of $10,000 in Auckland, with links to lenders’ websites. Use Canstar’s personal loan comparison selector to view a wider range of products on Canstar’s database. Canstar may earn a fee for referrals.

BNZ

The BNZ is sticking with its forecast that the RBNZ will cut the OCR to a low of 2.75% by the end of the year. But adds that: “the rate cutting cycle appears to be entering its final stage”.

This means that unless there’s big shock to the economy, longer-term fixed mortgage rates have already bottomed out. And only shorter-term rates – six-month and one-year fixed – are likely to dip lower, into the 4.5%-5.0% range over the second half of the year.

BNZ OCR Forecast May 2025

Kiwibank

Kiwibank’s economists have long called for a lower OCR, and they are blunt about what they think the RBNZ should do in the face of the weakness of the NZ economy: cut the OCR to 2.5%.

After the RBNZ’s May 28 meeting, Kiwibank said that while there’s a good chance of another two rate cuts to 2.75%, and it’s a “step in the right direction”, it’s not enough.

Kiwibank thinks that by August the RBNZ will wake up to this need and revise its OCR tracker to 2.5%. And this will mean more rate relief for mortgaged households.

But if the RBNZ doesn’t move the OCR below 2.75%, mortgage rates aren’t like to move lower, either, as the market has already factored in those cuts. Instead, mortgage rates will bottom out and remain static until the economy recovers, which could take a while.

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Westpac

Westpac is forecasting the OCR to bottom out at 3%, although the RBNZ is more likely to make its next cut in August, rather than July. However, it could be lowered further, due to risks to the global economy.

Westpac says that the markets have already priced in OCR cuts to slightly above the RBNZ’s projected OCR track, which now bottoms out at 2.85%.

It adds that there could be some scope for short-term mortgage rates up to a year to fall further, on the back of more OCR cuts. But short-term rates remain above current longer-term fixed rates, which are either below or close to 5%.

Westpac’s caution to mortgage shoppers is: “Fixing shorter than a year is a bet that the OCR bottoms somewhat lower than 2.75%.”

Westpac OCR Forecast May 2025

Mortgage Rates vs OCR

As you can see from the graph below, in the five years in the lead-up to the pandemic, mortgage rates were pretty stable, as was the OCR, which sat around 2%. During the same period, one-year mortgage rates were around 5% and two-year terms around 5.3%.

Looking at banks’ predictions, they see the OCR settling between 3% and 3.75% over the next two years. So on those forecasts, where can we expect interest rates to settle?

If we take a rough mid-point of 3.5%, the last time the OCR was at a stable 3.5% was in the period from July 2014 to May 2015, and during that time the average one-year rate was approx 5.9%, and the average two-year mortgage rate was 6.1%.

These are the banks’ standard carded rates, so if you’ve a 20%-plus deposit and a good credit history, you’re very likely to qualify for a lower special rate.

But, ultimately, while the OCR is coming down, along with mortgage rates, it’s important to remember that the ultra-low rates that some lucky homeowners managed to lock in during the pandemic were outliers, and that the historical, average one- and two-year mortgage rates of between 5% and 6% are likely to be the future, too.

About the author of this page

Bruce Pitchers is Canstar NZ’s Content Manager. An experienced finance reporter, he has three decades’ experience as a journalist and has worked for major media companies in Australia, the UK and NZ, including ACP, Are Media, Bauer Media Group, Fairfax, Pacific Magazines, News Corp and TVNZ. As a freelancer, he has worked for The Australian Financial Review, the NZ Financial Markets Authority and major banks and investment companies on both sides of the Tasman.
In his role at Canstar, he has been a regular commentator in the NZ media, including on the Driven, Stuff and One Roof websites, the NZ Herald, Radio NZ, and Newstalk ZB.
Away from Canstar, Bruce creates puzzles for magazines and newspapers, including Woman’s Day and New Idea. He is also the co-author of the murder-mystery book 5 Minute Murder.