When Will Interest Rates Go Down?

Over the past two years, average mortgage rates have more than doubled. But, finally, it seems that mortgage rates are on the way down. Canstar looks at what the big banks are predicting.

When will interest rates go down? It’s a question on the lips of any homeowner with a mortgage. Over the past three years, the Reserve Bank (RBNZ) has 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 have 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%. At time of writing (28/05/24), the same rate is 7.20%.

But, fingers-crossed, it does seem we’ve passed peak mortgage pain. So far this year we’ve seen a slight reduction in average rates across all fixed terms. On Canstar’s database, the average 1-year rate has fallen from 7.49% at the beginning of the year, while 2- and 3-year fixed terms are down 0.26% and 0.31%, respectively.

In a shock move, in its recent Monetary Policy Statement, the RBNZ did revise its peak OCR predictions up slightly, from 5.60% to 5.65%, due to a slower than expected fall in inflation. However few banks think that this will be necessary. And, the RBNZ still predicts inflation to return to its target range of 1-3% by the end of the year and OCR cuts to follow in 2024.

RBNZ OCR Forecast

So given the recent mortgage rate cuts, and the RBNZ’s revised OCR outlook, when are interest rates likely to come down enough to bring relief to homeowners, investors and business owners? Let’s take a look at what the major banks predict.

Below is a quick overview of the banks’ OCR forecasts. Click on each to jump to a more detailed overview of their predictions:

  • ANZ: No further OCR rate hikes, with the first cut in May 2025. Although with the possibility of cuts earlier rather than later.
  • ASB: No more rate rises, an initial cut to the OCR in February 2025, with mortgage rates to follow.
  • BNZ: Mortgage rates to hold steady over 2024, the first cut coming in February 2025.
  • Kiwibank: No more OCR increases, rate cut by November 2024, possibly February 2025.
  • Westpac: No further lift to the OCR, but no cuts until February 2025.

ANZ logo


RBNZ OCR Forecast

Of all the banks over the past 18 months, the ANZ has been the most hawkish on interest rates. Indeed, early this year in its February Property Focus, it was predicting two more OCR hikes and the possibility that mortgage rates could rise even higher.

However, since then the ANZ’s economists have recalibrated their slide rulers, and as you can see from the above graph from its May RBNZ Monetary Policy Statement Review, the ANZ’s OCR prediction is now more optimistic that the RBNZ’s.

Overall, the ANZ is forecasting the first cuts to the OCR to occur from May 2025, but also that due to “increasingly broad-based weakness in the economy” there is the chance of cuts coming earlier rather than later.

As to how that might flow through to interest rates, in the ANZ’s April Property Focus, the bank predicts that the 1-year fixed rate for owner-occupiers with 20% equity will have dropped to 6.6% by this time next year.


ASB Bank logo


Over the past few months, the ASB has been wavering a bit about the timing of the first OCR rate cut. Towards the end of 2023, in its Economic Weekly reports, it was forecasting the OCR to hold at 5.5% until February 2025.

Then, earlier this year, it pulled back on its forecast, pencilling in November as the month that the RBNZ would start to wind back the OCR.

However, now it’s come to the conclusion that interest rates need to remain higher for longer. In its review of the RBNZ’s May Monetary Policy Statement, it states: “We expect the RBNZ to keep the OCR on hold until at least February 2025 – that is our forecast date, but the risks are skewed to a later start.”

The bank says “at least” February because it warns that if inflation doesn’t ease before then, the RBNZ might wait even longer before making the first OCR cut.

When it comes to how this will affect mortgage rates, the ASB says:

Shorter-term mortgage rates (floating or fixed up to 1 year): will remain unchanged over 2024, but then head lower over the course of 2025.

Longer-term fixed rates (2- to 4-year fixed): will continue to fall this year.

Interestingly, the ASB notes that current 5-year fixed rates are now below their 20-year average, which signals that substantial falls from here for them are unlikely.

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 logo


At the end of last year, the BNZ’s chief economist, Mike Jones predicted that the only way for the OCR during 2024 was down, due to the NZ economy being in poor shape, and that by now we could already be seeing a lower OCR.

However, he also hedged his bets by saying that rate cuts could come later if the RBNZ really wanted to ensure inflation was dead and buried – which turned out to be the case.

Now, in the wake of the RBNZ’s higher-for-longer messaging, the BNZ has pushed back its prediction of the first cash rate cut to February 2025. And the bank notes that mortgage rates are going to stay high for the remainder of the year.

In brief, the BNZ now forecasts:

Floating rate: static until cuts to OCR, then down to towards 7% by mid-2025.

Shorter-term mortgage rates (1- to 2-year fixed): will remain unchanged over 2024, then fall early next year.

Longer-term fixed rates (3-year fixed): will remain unchanged over 2024 and slowly reduce in 2025.

In his latest Property Pulse, Mr Jones offers salient advice about break-even points for those facing the refix dilemma of whether to opt for a shorter fixed-term mortgage rate.

He writes: “It’s currently possible to fix for two years at around 6.75%. Alternatively, you could fix for one-year at around 7.15% and then, assuming rates do fall, roll onto a lower one-year rate in a year’s time.

“Based on market pricing, to break even on the rolling shorter-term strategy relative to the two-year strategy, the one-year rate needs to be about 0.8 percentage points lower in a year’s time (around 6.35%).”

Kiwibank logo new


Towards the end of last year, Kiwibank was consistent in saying that interest rates had hit their peak, and that a cut to the OCR would arrive in May 2024, with mortgage rates to follow.

However, the RBNZ’s more aggressive stance against enduring inflation has seen Kiwibank shift its OCR rate-cut forecast out to November, at the earliest.

While the bank’s economists don’t think the economic outlook warrants any further rate hikes, they do admit that cuts could come later rather than sooner.

The bank’s glass-half-empty view is that if you take the RBNZ on its word, OCR cuts won’t occur until the latter end of 2025, which means another 12 months of pain for households and businesses struggling with high interest rates.

However, let’s all be optimists and hope that reality is more like the bank’s half-full outlook: that a pivot in the RBNZ’s policy is now on the horizon, and that the next move in rates could come as soon as November this year, or at least February 2025.

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Westpac has long been one of the more hawkish banks when it comes to the OCR. And after the RBNZ’s first Monetary Policy Statement of the year, back in February, Westpac’s chief economist Kelly Eckhold said the bank remained comfortable with its view that the OCR would remain on hold over 2024, before experiencing a gradual easing cycle beginning early in 2025.

And the bank is sticking to its guns. After the RBNZ held the OCR at 5.5% in May, Westpac said it still expects an initial easing in February 2025, however the risks are “tilted to a later easing if inflation doesn’t perform”.

Westpac says the key to any possible OCR cut is non-tradable inflation, which is running much hotter than the RBNZ had expected, so the risk remains that OCR easing might occur later than currently expected.


Lowest Mortgage Rates for Refinancing

Looking to refinance your mortgage? The table below displays some of the 1-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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About the author of this page

Bruce PitchersThis report was written by Canstar’s Editor, Bruce Pitchers. Bruce has three decades’ experience as a journalist and has worked for major media companies in the UK and Australasia, including ACP, Bauer Media Group, Fairfax, Pacific Magazines, News Corp and TVNZ. Prior to Canstar, he worked as a freelancer, including for The Australian Financial Review, the NZ Financial Markets Authority, and for real estate companies on both sides of the Tasman.

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