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. Over the past six months, the RBNZ has cut the OCR three times, from 5.5% to 4.25%, and banks have started reducing their mortgage rates.
At time of writing (13/01/25), the average one-year fixed rate on Canstar’s database is 5.83%, and over the past 12 months average fixed rates across one to three years have dropped around 1.5%.
And now that inflation is back in its cage, sitting at 2.2%, the RBNZ says that if economic conditions continue to evolve as it predicts, it will be able to lower the OCR further, starting next month at its February meeting.
So given the RBNZ’s rate-cut forecasts, what are the major banks predicating for the OCR and mortgage rates over the coming months? Let’s take a look.
Below is a quick overview of major banks’ OCR forecasts. 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: Three 25 basis points (bps) cuts to the OCR over the RBNZ’s next three meetings, so that it’s sitting at 3.5% by the middle of this year. However, don’t expect mortgage rates to drop much lower than their current levels.
- ASB: Expects a 50bps OCR cut in February, followed by two 25bps cuts in April and May, down to an endpoint of 3.25%. While shorter term home loan rates up to two years will reduce closer to 5%, longer term rates will stay the same or increase.
- BNZ: Predicts 25bps cuts to the OCR at each RBNZ meeting this year until it reaches a low of 2.75% in September 2025. Short-term and variable mortgage rates to fall further, but longer-term rates to remain constant.
- Kiwibank: Forecasting a 50bps cut in February, followed by three 25bps cuts at each subsequent RBNZ OCR meeting to a low of 3%. Short-term mortgage rates to fall further, but longer-term rates to rise.
- Westpac: Another 50bps shaved off the OCR in February, plus 25bps cuts in April and May. OCR to be 3.25% by the end of 2025, before rising in 2026. Shorter term home loan rates to fall to match current longer term fixed rates.
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
Always one of the most hawkish banks when it comes to the OCR, the ANZ expects the RBNZ to cut the OCR gradually at its next three meetings, in 25bps steps, so that it’s sitting at 3.5% by the middle of the year.
However, ANZ says this won’t have a huge effect on mortgage rates, because recent cuts have already factored in a lot of this year’s OCR forecasts.
The ANZ points out that wholesale interest rates have increased over the past couple of months, due to Trump winning the US Presidential election and the inflationary risks associated with his planned policies.
So while Kiwi borrowers can expect further cuts to one-year fixed rates over the coming months, they won’t be large, and longer term rates will not fall further, and are likely to start rising by the end of the year:
ANZ Projected Special Interest Rates
| Interest Rates | March 2025 | June 2025 | Sept 2025 | Dec 2025 | March 2026 | June 2026 |
| Floating | 7.1% | 6.6% | 6.6% | 6.6% | 6.6% | 6.6% |
| 1-Year | 5.7% | 5.6% | 5.6% | 5.6% | 5.6% | 5.6% |
| 2-Year | 5.7% | 5.7% | 5.7% | 5.7% | 5.7% | 5.7% |
| 3-Year | 5.9% | 5.9% | 5.9% | 5.9% | 5.9% | 5.9% |
| 5-Year | 5.9% | 5.9% | 5.9% | 6.0% | 6.0% | 6.0% |
Source: ANZ Research
ASB
The ASB expects a 50bps OCR cut in February, taking it down to 3.75%, followed by two 25bps cuts in April and May, to an endpoint of 3.25%.
But like all the big banks, the ASB notes that this will only affect shorter-term mortgages, which will drop towards 5% by the end of the year.
As the tables below show, the ASB notes that longer-term mortgage rates are already well below their 20-year averages, so homeowners shouldn’t expect them to drop any further and, instead, will see them rise over the next year.
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 expects 25bps cuts to the OCR at each RBNZ meeting this year until it reaches a low of 2.75% in September – although the BNZ says that there is still a chance of a 50bps reduction in February.
But while the bank foresees the variable rate falling into the 6s, and short-term rates into the low 5s, it says longer-term rates will remain steady.
However, the BNZ warns that there’s always uncertainty surrounding mortgage rate predictions, and that inflation risks associated with the Trump presidency could mean that the OCR remains above 3% in late 2025, keeping all home loan rates at higher levels.
Kiwibank
Kiwibank’s economists forecast a 50bps cut in February, followed by 25bps cuts at subsequent OCR meetings, taking the OCR to a low of 3% by the end of the year.
It notes that its predictions are ahead of the RBNZ’s OCR forecasts, which see the OCR reaching 3.5% by the end of 2025. But Kiwibank has long been calling for a lower OCR and questions the logic of the RBNZ keeping the OCR higher for longer, saying it will further dampen an already hurting Kiwi economy.
And Kiwibank says the extra cuts to the OCR will be good new for Kiwis with shorter-term mortgages. It predicts one- and two-year rates to reduce further this year before bottoming out, but says longer term fixed rates, five years and over, are likely to push higher, in part due to worries around Trumpflation.
Source: Kiwibank
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Westpac
Westpac says that the RBNZ looks set to cut the OCR by 50bps in February, followed by 25bps cuts in April and May, taking the OCR to 3.25% by the end of 2025.
However, from that point, in a longer-term forecast, the bank’s economists say that in 2026 the OCR will increase and settle at a neutral rate of 3.75%.
As for home loan rates, the bank notes that a lot of the future OCR easing planned by the RBNZ is already factored into longer-term mortgage rates. Westpac’s economists write that: “This suggests that it’s now more attractive to fix for longer periods than it has been for a while – perhaps even for terms as long as two to three years.”
It adds that in the coming months, shorter term rates are likely to fall towards current longer term fixed rates, providing mortgage relief all-around.
Westpac’s OCR Forecast
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 on the way 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 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 puzzle book 5 Minute Murder.
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