New year, new direction…

But what direction will mortgage rates take this year? We’ve already had one Reserve Bank decision to keep the OCR the same. What can we expect going forward?

Of course, we can never entirely predict the future, but we can make our best guess based on the information available.

This is what we are expecting for mortgages in 2026.

Official Cash Rate (OCR): Staying At Low Levels… For Now

On 18th February, the Reserve Bank announced that it was keeping the OCR on hold at 2.25%. This continues the easing cycle that they began in 2024 when inflation moved within their target band of 1-3%. Their view is that inflation will likely remain within that band over the next 12 months, so monetary policy will remain accommodative to support economic recovery.

So, where is the OCR going to go?

Many economists are forecasting that the OCR will remain around current levels for much of 2026, but that it may begin to creep up in the second half of the year.

This moves away from earlier expectations that the OCR would continue to fall. It looks like the easing cycle may be nearing its end, and the OCR could move upwards again if inflation takes off again.

Let’s see how that news might impact interest rates…

Mortgages: What Could Happen To Interest Rates?

While the OCR is one of the determining factors for setting interest rates, it is not the only one. Interest rates are also impacted by swap rates, bank funding costs and market expectations.

In 2026, we might see:

Short-Term Rates Staying Low

• The stability in the OCR has allowed banks to offer their shorter terms rates at a great rate. 1 to 2-year fixes should remain stable or even dip lower, as long as wholesale funding costs stay low also.

Long-Terms Rates May Creep Up

• Many banks price their 3-5 year fixed rates based on market expectations for future OCR moves. So, if the OCR has the potential to rise in the future, these increases will need to be priced into the longer-term rates. We have seen recent evidence of this already; shorter-term rates are competitive, but longer-term special rates have been moving up.

It’s a bit of a mixed bag for what to expect. Some rates are likely to remain competitive, but the longer-term rates could nudge higher if an OCR increase is anticipated.

What To Be Mindful Of This Year

These are the key things to keep in mind in 2026:

1. Timing Matters — Especially on Fixed Terms
   With the potential for rates to shift, how and when you fix your mortgage will matter a lot. If your mortgage is coming off a higher rate, you might be able to take advantage of competitive rates now. Or, you might choose to split portions of your mortgage across different terms to spread your risk.
2. Banks Are Pricing in Future Policy Moves
   Banks often adjust their fixed rates before the RBNZ changes the OCR. They set those rates based on market pricing and funding expectations. That’s why long-term mortgage specials may not seem as good as the short-term ones!
3. House Prices and the Economy Are Part of the Puzzle
   Many economists expect house price growth to remain modest. In turn, that means borrower demand is likely to stay balanced and will not fuel inflationary pressure. If house prices do start to climb again, it could influence monetary policy decisions.
4. Wholesale Markets, Not Just OCR, Matter
   It is not just local conditions that influence our mortgage market. Global pressures can also. International markets, funding costs and swap rates can all push mortgage pricing up or down. Sometimes, this has nothing to do with what the OCR is set at, so don’t rely solely on OCR movement to make decisions about your borrowing.

What Does It All Mean?

➡️ OCR – likely to remain relatively stable, but there is the potential for upward movement later in the year if inflation and the economy continue to strengthen.

➡️ Mortgage rates will be a mixed bag as they will reflect the stable OCR conditions and market expectations. Short-term rates are likely to remain competitive, while longer-term rates may move slightly higher.

➡️ Borrowers need to consider timing and mortgage structure, as the focus should not be on what rates are doing now, but where they might move to in the months ahead.

If you’re thinking about refinancing, refixing, or borrowing in 2026, having expert guidance can make all the difference. Predictions can be useful, but decisions should always be personalised to your situation.

That’s why it is vital to speak with an experienced mortgage adviser to help you decide the right strategy for your home loan this year. I would love to be that adviser. Get in touch with the trusted Mortgage Suite team today and take the first step towards creating a mortgage that works for you.