BNZ retains flat 2026 house price forecast as RBNZ begins tightening cycle and fixed rate uptrend continues
BNZ has held its flat house price forecast for 2026, even as the Reserve Bank begins a long-anticipated tightening cycle that's expected to push both floating and fixed mortgage rates higher over the coming year.
House prices holding steady, for now
In its latest Property Pulse report, BNZ chief economist Mike Jones (pictured) said national house prices were essentially unchanged over the first half of the year, with the REINZ House Price Index sitting 0.1% lower in June than in December 2025. Early signs of momentum in the first quarter were unwound by June, with the index falling 0.7% from March.
Jones said sales activity had also cooled through the first half, running around 5% below average by June, a trend he linked to a mix of factors including Middle East hostilities, a soft labour market, election-related uncertainty, and rising mortgage rates.
Looking ahead, BNZ has pencilled in a modest 3% house price gain for 2027, though Jones cautioned against reading too much into that figure.
"It's essentially a view of low but positive nominal house price inflation," he said.
Mortgage rates set to keep climbing
The RBNZ lifted the official cash rate by 25 basis points to 2.5% earlier this month, its first hike in three years. BNZ expects at least two more 25-basis-point increases before year's end, with the cash rate ultimately peaking around 4% by May next year.
Floating mortgage rates, currently just over 6%, are forecast to top 6.5% by year's end and push through 7% in the first half of 2027. Fixed rates, which have already lifted between 20 and 50 basis points this year depending on term, aren't expected to rise as sharply from here.
The move validated BNZ's own call — ahead of the decision, it was one of only two of the five majors pushing for an immediate hike, with the rest favouring a hold. All five have since passed it on in full, lifting floating rates by the full 25 basis points while leaving serviceability test rates unchanged.
A more finely balanced fixing decision
With the gap between short- and long-term rates widening, Jones said the calculus facing borrowers has shifted.
"We think the mortgage fixing decision is looking more evenly balanced," he said, a change from BNZ's previous view that longer terms offered better value.
Jones said individual borrower circumstances, rather than market timing, may now play a bigger role in the decision, alongside strategies that spread risk across multiple terms.
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