ASB says fixed and floating rates are past their lows, with upward pressure set to persist
New Zealand mortgage rates have moved past the bottom of the current cycle, according to ASB's latest Home Loan Rate Report, with the bank now urging borrowers to lock in a strategy rather than wait for further falls.
OCR hike flows through to lending rates
The Reserve Bank lifted the official cash rate by 25 basis points to 2.75% at its September meeting, having earlier cut the rate to a low of 2.25% in November 2025. ASB said the tightening has already filtered through to home loan pricing across the board.
"Firstly, despite several opposing forces at play in the local and global economic environment at present, mortgage rates are expected to go up, not down," the bank said in its September report.
One-year fixed rates currently sit at 4.99%, still around 2.5 percentage points below the peaks of 2022/23, but all fixed terms have lifted off their 2025/26 lows. The variable rate stands at 6.29%, with ASB noting floating rates have moved up "more in line with the OCR increases observed in July and September." Longer-term fixed rates are expected to face continued pressure into 2027, partly reflecting moves already made by the Reserve Bank of Australia.
Where the cycle ultimately settles remains contested: major banks' forecasts for the OCR peak currently range between 3% and 3.75%.
Borrowers urged to plan rather than time the market
ASB said the old question of "is this the low?" has now shifted to what borrowers should do if the low point is already behind them. The bank cautioned against chasing the exact bottom of the cycle. "It's not all about picking the bottom of the mortgage interest rate cycle, especially now with the balance of risks and market pricing pointing to higher mortgage rates," ASB said.
Floating rates remain the most expensive option, while fixed terms are now considered past this cycle's lows based on ASB's own forecasts. The bank said mortgage rates are likely to settle well above the historic lows seen during the COVID-19 period.
That caution is already showing up in borrower sentiment: ASB's own Housing Confidence Survey found net 57% of respondents now expect borrowing rates to rise over the coming year, around the highest level since April 2023. Buying sentiment has held firm at a net 20%, even as house sales have dropped to a two-year low and rising mortgage rates weigh on affordability.
Adviser takeaway: match strategy to borrower risk appetite
ASB recommended borrowers weigh their budget, appetite for rate changes, and need for flexibility against the goal of minimising overall borrowing costs.
"We suggest borrowers pick a strategy that suits personal budgets (including a tolerance for changing interest rates), the need for flexibility, as well as the goal of minimising interest rate costs," the bank said.
With LVR settings and DTI restrictions also shaping borrowing capacity, advisers may find this a timely moment to revisit fixed-versus-floating strategies with clients ahead of further RBNZ moves expected through 2027.
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