Mortgages & OCR Cuts: After the Turbulent Half of 2025, Where Is the Housing Market Heading?
Mortgages & OCR Cuts: After the Turbulent Half of 2025, Where Is the Housing Market Heading?
After the turbulent first half of 2025, the New Zealand housing market is at a turning point. Inflation has eased back within the Reserve Bank’s target band, unemployment has slightly drifted higher, and finally, the RBNZ has restarted with rate cuts. However, these are still working their sluggish way down to retail mortgage pricing.
Below is your insight on the new pressures on mortgage rates, prices, buyer sentiment, the forces driving them, and how savvy homeowners can position themselves for those changes.
Mortgage Rate Trends: What the Latest OCR Cuts Mean for Homeowners
August saw the RBNZ cut the Official Cash Rate (OCR) to 3.0%, citing that core inflation measures have fallen back inside the 1–3% band and non-tradables inflation continues to cool.
Following the cut, the big banks started to offer discounts on their floating and key fixed terms. ANZ cut floating rates in August, with the changes taking effect in late August. It also cut savings rates, announcing a broad-based easing posture.
The bottom line (June till September) is that short-dated fixed rates (6-24 months) and floating rates have crawled downwards since June, with banks now getting active on “specials” as wholesale rate expectations fall.
Housing Affordability: Is Relief Finally Here?
Affordability has increased marginally from the worst periods of 2023-24, owing to lower servicing costs and softening prices in select regions. Several industry updates through winter noted that affordability is the best since pre-COVID peaks, even as rents remain tight, primarily due to marginal easing in debt servicing.
At the same time, stress was still there. Centrix reports that mortgage arrears have come off their mid-year highs but are still elevated by historical standards: in August, arrears were at the 1.38% level (~21,200 loans past due), down approximately 400 accounts from June, with refinancing and rate-shopping on the increase.
The labour market is another swing factor for stress. The unemployment rate lifted to 5.2% for the June 2025 quarter, from 5.1% in March, its highest since 2020, which usually dampens borrowing appetite.
House Prices Update: Flatlining or Poised for Recovery?
House Prices
Multiple house price indices paint flat to soft through mid-winter. QV HPI median prices show a 0.5% drop in values from the three months to July, some 13% below the peak in January 2022. OneRoof/Valocity likewise found that national average values in June were unchanged compared to January, underlining subdued momentum despite rate relief.
Property Sales Volumes
Winter sales were up year-on-year in July, with more auctions being held, but overall market turnover is still below the long-run average. In August, the data indicated that demand was weaker in some locations; however, many regions were positive year-on-year, so the primary trend was approximately unchanged.
NZ Property Market Forecast: What’s Ahead for Prices & Sales
- Mortgage rates: They will drift lower with 1–2 year fixed terms and floating rates on the lead while cuts accumulate in the OCR. Special rates will first step down, then normal carded ones.
- Prices: A sideways to mildly positive national trend into autumn 2026 feels most likely, think flat to +2% nationally, with regional divergence. Affordability tailwinds and falling rates support a floor, but higher unemployment and tight credit standards cap upside.
- Sales: Gradual improvement from low levels as servicing costs ease and confidence stabilises, still uneven by region and property type.
What Should Homeowners Do Now?
How to Prepare for Rate Shifts
To the extent that 1–2-year specials drop further, set your budget with a cushion. Ask the lender or broker to send you updated scenarios for repayments along various paths of the OCR. (Since the cut in August, banks have been changing rates on floating and fixed terms.)
Use a Laddered Fixing Strategy
Given short-term fixed rates look like leading downdraft, many borrowers are mixing terms (e.g., part 6-12 months, part 18-24 months) to glean some near-term relief while setting themselves up for a shock down the road.
Before fixing the past 2 years, check with your adviser, as that time is coming but not quite here yet. But you could be missing out on further downside in longer-term rates if you fix too soon. These rates > 2 years will drop when the US Federal Reserve lowers its rates.
Secure the Best Mortgage Rate
Centrix reports that inquiries about refinancing have been increasing due to sharper pricing from borrowers. Don’t just assume that what you have is the best rate available today. Request repricing, and talk with your broker about other alternatives.
Building Cash Buffers
Emergency savings should be your priority even while you score pricing wins, given rising unemployment rates and soft growth. That jobs data (5.2% unemployment) would argue for caution.
What Should Homeowners Do Now?
- OCR: RBNZ cut the OCR to 3.0% in August and flagged that core inflation is within target; markets expect more easing given weak GDP. This is the primary channel for lower mortgage rates over spring/summer.
- Employment: Unemployment 5.2% (June quarter). A headwind for rapid price growth and a reason to keep buffers healthy.
- Regulation: Debt-to-income (DTI) caps are now active (alongside looser LVRs than 2023), shaping lending appetites, especially for first-home buyers and investors. Plan finance early.
- Mortgage rates: Bank floating and short fixed rates have edged lower since June in response to the August OCR cut and softer wholesale rates. Keep an eye on weekly averages and lender “specials.”
Rates are trending down, prices are stabilising from a low base, but a softer economy and higher unemployment mean the recovery will likely be orderly, not explosive, so plan proactively, shop hard for rates, and keep a buffer.
FAQs
- Will mortgage rates in New Zealand keep falling after the latest OCR cuts?
While further cuts are expected, banks usually take time to fully implement them in retail rates, and market conditions like funding costs can influence how quickly they fall. - How much deposit do I need to buy my first home in New Zealand?
The standard minimum deposit is 20%, but many lenders now offer options with 5% or 10% deposits for home buyers. - What does housing affordability look like in 2026?
Affordability has improved thanks to easing mortgage servicing costs and softer prices in some regions. However, rising unemployment and tight credit standards mean affordability remains a challenge for many households. - Is now a good time to refinance my mortgage?
Refinancing activity will increase in 2025/2026 as banks sharpen pricing and offer new specials. Even if you locked in a competitive rate last year, it’s worth asking your lender for repricing or exploring alternatives with a mortgage adviser. - How will the bright-line test and DTI rules affect property buyers?
DTIs may make it harder for some borrowers to access larger loans, while bright-line rules influence investor sales. Under these regulations, planning your finances early and seeking advice is key.
Ready to Navigate Market Changes?
With rates easing, prices steadying, and new lending rules in play, now’s the time to be proactive. Whether it’s stress-testing your loan, refinancing for sharper pricing, or planning a smarter fixing strategy, we can help you position for what’s ahead.
Talk to Rapson today about your next move, and let’s get your mortgage working smarter for you.