16/10/2025
Where is the bottom of the mortgage rate market? 6 months out? 12 months out? Even longer?
In October, the Reserve Bank of New Zealand (RBNZ) made a big move, cutting the Official Cash Rate (OCR) by 0.50% down to 2.50%. This was their biggest cut in a while.
Around the same time, you might have heard that New Zealand's GDP (Gross Domestic Product) dropped by 0.9%.
How bad is a 0.90% GDP drop?
Think of GDP as the country's report card. It shows how much stuff we're making and how busy the economy is. When GDP drops, it's like the "check engine" light coming on for the economy. It means things are slowing down, and our economy is shrinking.
Why is the Reserve bank waking up now?
Things are looking a bit worse than the RBNZ expected. They were focused on inflation (how fast prices are rising), but they might have overlooked how little confidence businesses have right now. Simple, small rate cuts weren't enough to get things moving again.
New Zealand also has to keep up with the rest of the world. If big banks in the US, Australia, and Europe cut their rates more than we do, money will flow out of NZ to get a better return elsewhere. This makes the NZ dollar weaker.
Checklist: How to Spot the Lowest Mortgage Rates
So, how can you tell if we've hit the bottom? Watch for these signs, which could mean rates will start to rise again:
* Inflation goes up: Prices for everyday things like rent, eating out, and clothes rise faster than expected.
* More people working: Fewer people are unemployed, and jobs start paying more money.
* Businesses pick up: Companies start making and spending more, and the economy gets busier.
* The Reserve Bank slows down: The RBNZ might stop lowering interest rates because they donāt want prices to rise too fast.
* Other countries look better for investors: People can earn more money overseas, so they move their money there ā which can make New Zealandās mortgage rates rise again.
* The NZ dollar gets weaker: It takes more NZ dollars to buy things from overseas, so imported stuff (like phones or fuel) becomes more expensive.
***Since most of these things aren't happening, we expect another OCR cut in November. If that trend holds, fixed rates should continue to fall.***
What if Rates and Rent Keep Falling?
If we have falling mortgage rates, falling rents, and lots of houses for sale, it creates a unique situation. It means that even with cheap lending, we won't see a property boom. Prices will likely stay flat.
Who wins in this situation?
1) First Home Buyers.
2) Long-term property owners (who bought their home before 2019).
For a typical first-time buyer, a mortgage rate under 3.99% is where the repayment numbers really start to make sense and look attractive.
What About the LVR Changes?
The RBNZ also changed the LVR (Loan-to-Value) rules. Think of it this way: the banks have money to lend, but it's just sitting there collecting dust.
By lowering the OCR and telling banks to lend more money to first home buyers and investors with smaller deposits, the RBNZ is trying to restart the economic engine.
The Golden Question: When will the property prices increase?
If we boil it down to the simplest method - itās a first home buyer comparing their mortgage repayment with the rent they currently pay.
The closer renting gets to a mortgage payment, the faster the "rational" buyer considers purchasing a property.
Average mortgage size for first home buyers ranges from $550K - $750K (region dependent) & $640/wk is the going average rent.
To get this, matched up with a mortgage you can clearly see we would need to be below 3.69% fixed to see the wave of buyers rushing to buy houses, stock starts to lessen and prices begin to move up.
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