Where Will Mortgage Interest Rates Be in 2026?

It is the question on every borrower's mind: where are mortgage rates heading? Now that we are in early 2026, the rate environment looks quite different from the peaks of 2023-2024. But what comes next? Here is what the experts are saying-though as always, take any prediction with a grain of salt.

:::note Next RBNZ Decision

The next OCR announcement is Wednesday 19 February 2026. Markets will be watching closely for signals about whether the cutting cycle has truly ended or if further adjustments are coming. Check back after this date for updated commentary.

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Where We Are Now (February 2026)

The Reserve Bank of New Zealand has been busy. After a series of OCR cuts through 2025, the Official Cash Rate now sits at 3.75%-a significant drop from the 5.50% peak we saw in 2023-2024. This has flowed through to mortgage rates, with one-year fixed rates generally sitting in the mid-4% range.

For context, many borrowers were fixing at 6-7% just 18 months ago. The relief for household budgets has been real.

What the Reserve Bank Is Signalling

The RBNZ has indicated that the cutting cycle may have further to run, though the pace of cuts is likely to slow. Their projections suggest the OCR could settle around 3.00-3.25% through 2026, providing some further relief for borrowers.

The Reserve Bank's next decisions depend heavily on inflation and economic conditions. They want to see inflation settle around 2%-right in the middle of their 1-3% target band. Current indicators suggest we are heading in that direction, but global uncertainties remain.

What the Major Banks Think

The big banks have their economists crunching the numbers. Most bank economists believe the OCR has reached or is very close to its bottom for this cycle. The real debate is about when rates might start moving up again.

Regarding mortgage rates specifically, even though the OCR may stay flat, mortgage rates could start drifting upward from mid-2026. Banks price their fixed rates based on wholesale funding costs, which are influenced by expectations of future OCR moves-not just where the rate sits today.

Forecasters generally expect the OCR to stabilise somewhere between 2.00% and 3.50% over the next couple of years, which would correspond to fixed mortgage rates in the 4% to 6% range.

Why Rates Might Stay Low

Several factors could keep rates at relatively low levels.

New Zealand's economy contracted in 2024 and is recovering slowly. Growth forecasts for 2025 are modest at around 1-2%, picking up to perhaps 2-3% in 2026-2027. Weak growth tends to keep inflation-and therefore interest rates-in check.

Global uncertainty also plays a role. Trade tensions and tariff policies are creating headwinds for the global economy. This uncertainty tends to dampen demand and reduce inflationary pressures.

With inflation returning to target, there is less urgency to keep rates elevated. As long as inflation behaves, the Reserve Bank has room to keep the OCR lower for longer.

Why Rates Might Rise

On the other hand, several factors could push rates higher.

While inflation is heading in the right direction, it has proven stubborn in some areas. If it picks up again-whether from domestic pressures or imported inflation-the Reserve Bank may need to respond with rate increases.

New Zealand does not operate in isolation. If major economies like the US keep their rates higher, this can put upward pressure on NZ rates through currency and funding cost effects.

If the economy recovers more strongly than expected, the Reserve Bank may start normalising rates sooner. A healthier economy can handle-and may require-higher rates to prevent overheating.

Banks fund their mortgages from various sources, and their costs are not solely determined by the OCR. International wholesale funding costs, competition for deposits, and other factors all influence what they charge borrowers.

What This Means for Your Mortgage

If You Are Refixing Soon

The current environment offers some attractive rates compared to recent years. Most economists think we are at or near the bottom of the rate cycle.

Shorter terms of one to two years capture the current low rates but leave you exposed if rates rise. Longer terms of three to five years provide certainty if you value predictability. Splitting your mortgage across different terms hedges your bets.

There is no perfect answer-it depends on your circumstances and risk tolerance. What we can say is that the extreme rate rises of 2022-2023 are unlikely to repeat in the near term.

If You Are Buying a Home

For first home buyers, the current rate environment is more favourable than it has been for some time. Banks typically stress-test your borrowing capacity at rates 2-3% higher than what you will actually pay, so falling rates can help with serviceability.

That said, do not stretch your budget assuming rates will stay low forever. Build in a buffer for the possibility that rates could rise.

If You Have an Investment Property

Property investors have been through a tough few years with high rates eating into cashflow. Lower rates provide some relief, though rental yields remain challenging in many areas. The restoration of interest deductibility from April 2025 also helps the maths.

Key RBNZ Dates for 2026

The Reserve Bank announces OCR decisions on set dates throughout the year. For 2026, watch these dates:

Each announcement can move mortgage rates, so keep an eye on the economic commentary in the weeks leading up to these dates.

Add these dates to your calendar: Download RBNZ OCR Dates 2026 (.ics) - works with Apple Calendar, Google Calendar, Outlook, and most calendar apps.

The Honest Answer

Nobody knows exactly where rates will be in 12 months. Economists get it wrong regularly. Unexpected events-global conflicts, pandemics, financial crises-can upend the best forecasts.

What we can say with reasonable confidence is that rates are unlikely to return to the 6-7% peaks of 2023-2024 anytime soon. The OCR is probably at or near its cycle low. Gradual increases are more likely than rapid rises. The 4-5% range for fixed rates feels like reasonable planning territory for 2026.

The best approach is to stress-test your budget at rates somewhat higher than today, lock in terms that suit your circumstances, and review your position regularly with a mortgage adviser who understands your situation.

What Should You Do?

Rather than trying to time the market perfectly, focus on what you can control.

Review your current rates to check whether you are paying more than you need to be. Consider your refix strategy and think about splitting terms if you want flexibility. Build a buffer by making extra payments now to reduce your exposure to future rate rises. And talk to an adviser who can help you navigate your options.

The interest rate environment has improved significantly from the 2023-2024 peaks. While we cannot promise where rates will go from here, conditions are more favourable for borrowers than they have been for some time.