Fixed rates already above 5% as economists flag further OCR hikes ahead
New Zealand mortgage brokers advising clients on fixed-versus-floating decisions face a more urgent conversation this month, with fixed-term rates already pushing above 5% and economists across three major banks flagging further official cash rate hikes as a fresh Middle East oil shock reignites global inflation fears.
The fixed-rate decision brokers are facing now
Westpac notes that two-to-five-year fixed mortgage rates have already pushed above 5%, and while further OCR increases are likely, "fixing for one of these longer periods still appears attractive as it would insulate borrowers from a trend higher in the OCR over the next couple of years."
The three banks' near-term views differ slightly but point in the same direction. ASB expects the RBNZ to hike in October, after the central bank's own September Monetary Policy Statement had signalled a preference to hold off until December.
ANZ, by contrast, expects the RBNZ tightening cycle to extend beyond 3%, warning that "risks are growing that the RBNZ will need to keep on hiking beyond 3%."
What's driving the shift
Brent crude briefly touched US$110 a barrel last week as US-Iran tensions escalated in the Strait of Hormuz, pushing global bond yields sharply higher and hardening expectations that central banks, including the US Federal Reserve, will need to keep tightening.
ANZ has revised its own Fed forecast to three 25-basis-point hikes, now expecting the tightening cycle to begin in December rather than this week's meeting.
Despite the global volatility, New Zealand's underlying economy has held up better than feared.
Westpac now expects June quarter GDP to rise 0.2%, an upgrade from an earlier forecast of a 0.1% fall. ASB is slightly more optimistic at 0.3%, while ANZ expects a slimmer 0.1% lift. Kiwibank's economics team strikes a similarly cautious but resilient tone, writing that the economy "took a hit from the oil shock" but that the bank is "not counting ourselves out just yet."
Kiwibank's data show business sales rose 8.9% and profits climbed 7.9% in the June quarter, with wholesale trade and manufacturing — boosted by stronger meat and dairy commodity prices — the standout performers.
A more moderate house price outlook
Beyond the near-term rate path, Westpac's house price research points to a structural shift with implications for client conversations around capital growth. The bank identifies three forces reshaping the market: the likely end of the multi-year trend toward lower mortgage rates, changing population and demographic patterns, and a more effective housing supply response than in past cycles. Combined, Westpac says these point to "a more moderate house price recovery in the coming years," suggesting outsized capital gains will be harder to achieve than previously.
ASB reached a similar conclusion in its own recent research, End of an Era, forecasting no nationwide price growth in 2026, followed by 3.5% growth in 2027 and roughly 5% annual gains thereafter — a trajectory that wouldn't see prices return to their late-2021 peak until late 2029. The bank noted "there is some risk that the trend direction in mortgage interest rates is up," while pointing to first-home buyers now making up 29% of property sales in July, the highest share in more than 20 years.
Rate rises loom as RBNZ weighs a difficult call
The RBNZ faces a genuinely difficult call, weighing a temporary oil-driven price shock against the risk that it feeds into longer-run inflation expectations. Markets currently price around a 65% chance of an RBNZ hike in October, rising to near certainty by December, according to Westpac.
For advisers, the message across all four reports is consistent: mortgage rates are more likely to rise than fall in the near term, borrowing capacity will stay under pressure, and clients weighing fixed terms should factor in a tightening cycle that has further to run before it turns.
For more insights, read the Westpac Weekly Economic Commentary, ANZ New Zealand Data Wrap, ASB Economic Weekly, and Kiwibank Thrive HQ commentary.
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