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 four times, from 5.5% to 3.75%, and banks have reduced their mortgage rates.
At time of writing (07/03/25), the average one-year fixed rate on Canstar’s database is 5.34%, and over the past 12 months average fixed rates across one to three years have dropped around 170 basis points (bps).
And now that inflation is back in its cage, sitting at 2.2%, the RBNZ says that if economic conditions continue to evolve as predicted, it will be able to lower the OCR further over the rest of the year.
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 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 75bps of further cuts to the OCR to take it to 3% by September. However, don’t expect one- to three-year fixed mortgage rates to drop much lower than their current levels: only by between 10-20bps by the end of the year, which will mark the low point of the current rate cycle.
- ASB: Expects two further 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 are unlikely to fall further.
- BNZ: In line with the RBNZ’s forecast, it predicts 25bps cuts to the OCR at each of the RBNZ’s next two meetings, but thinks the RBNZ will have to go further, cutting the OCR to a low of 2.75% by the end of the year. Short-term and variable mortgage rates to fall further, but longer-term rates to remain constant.
- Kiwibank: Thinks the OCR to reach 3% by the end of the year, but the weak economy could see the RBNZ go sub-3%. As a result, short-term rates to continue a slow grind lower over the year, while longer term rates to remain stable.
- Westpac: OCR to bottom out at 3.25% in May. 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-3%, which Westpac says 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.
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ANZ
The ANZ expects the RBNZ to shave another 75bps off the OCR by August, taking it to 3%, and expects mortgage rates to fall further. However, it says that future reductions in mortgage rates are likely to be moderate, as the banks’ margins on mortgages are already tight.
In its February Property Focus, the ANZ says that it concurs with the “chorus of personal financial media commentators who think we are nearing the lows in mortgage rates”.
The bank says that two-year fixed rates are already at their low point and that, as a consequence, fixing at least part of a mortgage for that term would provide borrowers some certainty around their repayments, while still giving the flexibility to benefit from further rate cuts should the economy go belly up, or some other shock cause interest rates to fall further.
ANZ Projected Special Interest Rates
| Interest Rates | June 2025 | September 2025 | December 2025 | March 2026 | June 2026 | September 2026 |
| Floating | 6.5% | 6.2% | 6.2% | 6.2% | 6.2% | 6.2% |
| 1-Year | 5.1% | 5.0% | 5.0% | 5.1% | 5.1% | 5.1% |
| 2-Year | 4.8% | 5.1% | 5.1% | 5.2% | 5.2% | 5.2% |
| 3-Year | 5.1% | 5.2% | 5.3% | 5.3% | 5.3% | 5.3% |
| 5-Year | 5.6% | 5.5% | 5.6% | 5.6% | 5.7% | 5.8% |
Source: ANZ Research
ASB
As signalled by the RBNZ, ASB expects two further 25bps cuts to the OCR, in April and May, to an endpoint of 3.25%. Although, it doesn’t rule out the possibility of a third cut later in the year to an endpoint of 3.1%.
But because financial markets have already priced in the RBNZ’s intentions, the ASB doesn’t think there’s much scope for longer fixed-term interest rates to fall much further. Only shorter-term rates could dip, and then not by much.
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, can expect them to start to rise 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
In line with the RBNZ’s forecasts, it predicts 25bps cuts to the OCR at each of the RBNZ’s next two meetings, but thinks the RBNZ will have to go further, cutting the OCR to a low of 2.75% by the end of the year.
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 geopolitics could mean that the OCR remains above 3% in late 2025, keeping all home loan rates at higher levels.
Kiwibank
Kiwibank’s economists highlight that the RBNZ’s OCR tracker now has an endpoint of 3.14% by the end of the year, which is close to Kiwibank’s call for the OCR to be cut to 3%.
The bank is also clear in its opinion that, at 3.75%, the OCR is still at a level that is hard to justify given the country’s economic woes. It says that “interest rates remain at levels that restrain demand” and that the RBNZ might find it necessary to act more aggressively and reduce the OCR to below 3%.
As the OCR moves closer to 3%, Kiwibank thinks one- and two-year rates will grind slightly lower, while longer term rates will remain stable.
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Westpac
Westpac thinks the current easing cycle will finish when the RBNZ cuts the OCR to 3.25% in May. However, it says that markets have already factored in the OCR bottoming out closer to 3%.
As a result, longer term rates are now pretty much as low as they’re going to go, and are an attractive option for homeowners.
It says, short-term mortgage rates still have a little way to fall, as the RBNZ continues to cut, but they are “still likely to remain above current longer term fixed rates”.
It says that if you fix shorter than a year, you’re betting that the OCR is going to go sub-3%, which Westpac thinks isn’t likely to happen.
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 puzzle book 5 Minute Murder.
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