The Reserve Bank dropped the Official Cash Rate (OCR) from 2.50% to 2.25% on 26 November, delivering a little extra reprieve for mortgage borrowers as we head into the Christmas holidays.
At this stage, it’s looking like it’ll be the last reduction we get for this interest rate cycle.
The economy is starting to gain some traction—agriculture in particular is doing really well—and now that more and more of us are feeling the benefit of lower rates, the expectation is that we should all be feeling a bit more optimistic by the time next year rolls around.
Of course, we’ve got an election coming up in late 2026, which always creates a bit of uncertainty—especially if it’s not clear who’s going to be leading the country, and in what direction—but generally, things are on the improve.
What’s the outlook on interest rates?
The best one-year rate we’ve been seeing in recent weeks has been 4.39% with TSB, with 4.49% the rate on offer across all major lenders.
Meanwhile, the best three-year rate out there is sitting around 4.75%, which is really attractive if you’re looking to fix a bit longer term and lock in a bit more rate certainty.
We’re not expecting to see too much downward movement in interest rates off the back of this week’s announcement—even at the shorter-term end of things—the reason being how aggressively lenders are competing in the cashbacks space at the moment.
Three major lenders are currently offering 1.50% back on news loans, including both refinances and new house purchases. That means, on a $1 million loan, borrowers could get as much as $15,000 back.
Banks margins have been running pretty high of late, meaning there’s still a little bit there to play with, but as long as we’re seeing these sorts of big cashbacks on offer, it’s unlikely that we’ll see too much competition in mortgage rates as well.
Given we’re at the bottom of the cycle, looking to fix slightly longer term isn’t a bad bet. From here, the next moves in the OCR are likely to be upwards—with the market now starting to price increases in towards the back end of 2026 and beyond.
Check back in again next week for the latest news on New Zealand interest rates.
