Banks split on how far rates rise, as advisers weigh mortgage impact
The Reserve Bank of New Zealand (RBNZ) held the official cash rate (OCR) at 2.75% on 28 October in a 4–3 vote, surprising markets that had all but priced in a rise to 3%. For mortgage advisers, the message from economists is clear: this is a pause, not a turning point. Most major banks still expect an increase on 9 December, and the debate now is how high the OCR will ultimately go.
Governor Anna Breman, Carl Hansen, Prasanna Gai, and Rebecca Williams voted to hold, while Paul Conway, Hayley Gourley, and Karen Silk backed an increase. All seven agreed that tighter monetary policy is likely to be required, but differed on timing.
ASB said markets had put the odds of a hike at around 95% before the announcement. BNZ’s research team was blunter, saying it was “frankly flabbergasted” by the decision. Kiwibank took the opposite view. “Great, we certainly applaud the pause,” its economists said in their review.
Why the RBNZ paused
The majority pointed to lower-than-expected inflation, which eased to 3.7% in the September 2026 quarter from 4.1% in June. Wage growth remains subdued, and there is little evidence that businesses are padding margins on the back of higher costs. Those members also flagged growing risks of a sudden global downturn.
Upward pressure has not gone away, though. The RBNZ expects annual inflation to climb to 4.4% in the December quarter, driven by fuel prices, and noted that 56% of items in the consumers price index (CPI) basket rose by more than 3% in the year to September.
According to the New Zealand Institute of Economic Research (NZIER), the decision reflects a difficult balance between bringing inflation back within the 1–3% target band and protecting a recovery it describes as gradual and uneven.
Where mortgage rates go from here
Bank economists remain split on how far rates will climb. ANZ and ASB expect three 25-basis-point hikes in December, February, and March, taking the OCR to 3.5%. Westpac also expects a December move but sees a peak of 4% in September 2027, while BNZ expects a rise at the next meeting and a 3.75% peak.
Kiwibank sits at the other end, forecasting a move to 3% followed by 3.25% in 2027. NZIER is the most cautious, expecting just one more increase, in late 2027.
Wholesale markets reacted quickly, with ANZ noting the two-year swap rate fell around 13 basis points to 3.98% after the decision. Kiwibank argued that as markets wind back expectations of a 4% OCR, wholesale rates should fall, easing pressure on mortgage rates.
However, Cotality chief economist Kelvin Davidson said on the New Zealand Property Market Podcast that, with the OCR still heading up and global wholesale rates elevated, there is probably some upside for mortgage rates.
LJ Hooker head of network NZ Allaine Burkett urged borrowers not to read too much into the hold. “An unchanged OCR does not guarantee an unchanged mortgage rate, particularly for borrowers coming off an existing fixed term,” she said.
A buyers’ market heading into the election
The housing market remains subdued. LJ Hooker, citing Real Estate Institute of New Zealand (REINZ) figures, said September sales fell 11.6% year-on-year to 5,752, with properties taking a median of 46 days to sell. Available stock rose 10.7% to 34,001 listings, and first-home buyers made up a record 29.5% of purchases in the September quarter.
Sarah Wood, chief executive of realestate.co.nz, said the RBNZ had not closed the door on further rises and that buyers and those refinancing should watch the December announcement closely.
Before then, advisers will be watching the labour market data on 4 November, the general election on 7 November, and the RBNZ’s inflation expectations surveys from 17 November. Westpac cautioned that even a December hike is not guaranteed.
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