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 seven times, from 5.5% to 3%, and banks have reduced their mortgage rates. But whereto from here?

In its most recent report, released August 20, the RBNZ reviewed its OCR forecast downwards yet again, to a low of 2.5% by Q1 next year.

RBNZ OCR Forecast August 2025

So given the RBNZ’s forecast of further OCR cuts, and 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 that, by the end of the year, the OCR will hit 2.5%. 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: Given the “vibe” of the latest OCR announcement, the BNZ thinks that “additional modest declines in mortgage rates are likely, concentrated more at shorter terms”. However, as the risks of OCR hikes are a “long way off”, in terms of having to judge break-even rates and the pros and cons of going short or long, borrowers have some time up their sleeve to make a decision.
• Kiwibank: As the OCR is cut further, to 2.5%, the two-year swap rate should fall lower, to 2.8%, taking retail rates lower. By the end of the year, we’ll be at the bottom of the current rate cycle, giving home owners more certainty around fixing their home loan terms and securing the best rates.
• Westpac: In step with the general consensus, expects two more cuts to the OCR, taking it to a low of 2.5%. As a consequence, foresees more mortgage rate cuts over coming months, followed by a stable 12-month period and then upward movement from rates at the end of next year.

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

Even before the RBNZ’s recent rate forecast, the ANZ had called for an OCR of 2.5%. As such, the bank predicts two further 25bps cuts to the OCR, one each in October and November, and for the OCR to remain at 2.5% until the end of next year:

ANZ Projected OCR Rates

The ANZ says that the market has already priced in these cuts, taking short- and medium-term mortgage rates lower. However, because the market has only priced in around 38bps of cuts, instead of 50bps, there’s room for short-term fixed rates to move slightly lower.

ANZ’s OCR & Markets Forecast August 2025

However, the bank notes that because longer term rates are already at the bottom of their current cycle, while there’s “merit in fixing for six months, with a view to re-fixing for a longer term when that fixed term ends later in the year”, because of the continuing economic uncertainty, it’s a slightly riskier strategy than just fixing for one or two years, where rates are cheapest.

As a consequence, if you’ve a mortgage, it could be worth considering splitting your mortgage into chunks and fixing them across a mix of terms.

ASB

Until August’s OCR announcement, the ASB had forecast an OCR floor of 3%. But given the RBNZ’s statement, it now says: “We do think the RBNZ will follow through and cut the OCR by 25bps in both October and November.”

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”.

The ASB warns that due to many factors, both global and local, lower interest rates are not a given. And that just because further OCR cuts are predicted, it might not translate to lower mortgage rates.

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?

The answer, the ASB says, is not about trying to predict the bottom of the interest rate cycle. Rather, it’s to fix your mortgage to your financial needs – which includes your tolerance to any interest rate hikes and your flexibility – as well as securing the lowest possible rates.

ASB OCR Forecast August 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

For the past few months, the BNZ has been predicting further cuts to the OCR, but also that the rate cutting cycle is entering its final stage. And given the “vibe” of the latest OCR announcement, it continues to think that “additional modest declines in mortgage rates are likely, concentrated more at shorter terms”.

In the chart below, you can see the BNZ’s mortgage predictions, and how they’ve changed since January this year. And the bank predicts all rates have a little further to fall.

Overall, the BNZ says borrowers are already stepping away from shorter six-month mortgages, in favour of longer terms: “Mortgage fixing behaviour now appears less sensitive to current relative pricing, and more focused on the risks and opportunities from the shape of the next interest rate cycle.”

However, the bank considers the risks of OCR hikes are a “long way off”, so in terms of having to judge break-even rates and the pros and cons of going short or long, it says borrowers still have some time up their sleeves before they have to bite the bullet and make a longer-term decision on fixing.

BNZ Fixed Mortgage Rates Forecast August 2025

Kiwibank

Kiwibank’s economists have long called for an OCR of 2.5%. Indeed, they’ve been “forecasting, praying and rain dancing” for a 2.5% OCR since late 2023. So now they’ve the promise of a 2.5% OCR, what do they predict for mortgage rates?

The bank’s economists note that the RBNZ’s revised OCR tracker took the markets off guard, which caused the two-year swap rate, which is a key rate that banks use to price mortgages, to fall 16bps to 2.94%.

It says that this is good news for homeowning households, and as the OCR is cut further, to 2.5%, the two-year swap rate should drop to 2.8%, taking retail rates along for the ride.

So by the end of the year, once the OCR hits 2.5%, we’ll be at the bottom of the current rate cycle, giving home owners more certainty around fixing their home loan terms and securing the best rates.

Westpac

Westpac had been forecasting the OCR to bottom out at 3%. However, since the RBNZ’s August announcement, the bank has fallen into step with the general consensus and now expects two more cuts to the OCR, taking it to a low of 2.5%.

As a consequence it foresees more mortgage rate cuts over coming months, followed by a stable 12-month period and then upward movement from rates at the end of next year.

But while Westpac predicts that very short-term mortgage rates may fall slightly, fixing for longer periods of two to three years is still an attractive option.

And as mortgage rates bottom out over the next 12 months, Westpac predicts house prices will start to move in the opposite direction. This means, if you’re waiting for the bottom of the housing market, the time to strike could be now!

Westpac OCR Forecast August 2025

Mortgage Rates vs OCR

Looking at current predictions, over the next 12 months the OCR will settle between 2.5% and 3%. So on those forecasts, where can we expect interest rates to sit?

The last time the OCR sat around 2.5%-3%, was 10 years ago, and then the banks’ carded shorter-term rates were just over 5%, which is exactly where they’re sitting now. And as you can see below, even though the OCR did subsequently drop to below 2% in the years leading up to the pandemic, mortgage rates remained pretty static.

So as the banks’ economists point out, although the OCR is forecast to fall over coming months, you shouldn’t expect a lot more downward movement in current rates.

Although it’s worth pointing out, that a bank’s advertised carded rate is different from its special rate. This means, if you’ve a 20%-plus deposit and a good credit history, you’re very likely to qualify for a better deal.

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