James and Mike sat down with Matt Harris to unpack where the Reserve Bank could be heading next - and how upcoming OCR cuts may reshape New Zealand’s mortgage market. From inflation concerns to a potential property rebound, this discussion breaks down what every homeowner and investor should know about the changing economic landscape.
The State of Play: Why the OCR Matters
The trio kicked off by reflecting on how New Zealand arrived at this point. As Mike noted, the economy never had the chance to “reset” after the COVID era – stimulus spending kept things afloat, but the hangover arrived in the form of high inflation and rising interest rates.
Now, with a new Reserve Bank governor in place and the economy slowing faster than expected, the focus is firmly on when and how deeply the OCR will be cut. The GDP figure came in at twice as bad as forecast, signalling weak growth. James’ take? “We’re three years into a really tough market – why not drop 50 basis points and give the economy some love?”
But it’s not that simple. Inflation remains the key obstacle. “Inflation is a thousand times worse than a recession,” Mike explained, urging caution while acknowledging the need for action. Most agree that 50 basis points of OCR cuts are likely before the end of the year – but whether that comes as two small cuts or one bold move remains to be seen.
How Low Will Mortgage Rates Go?
Mortgage rates have already begun to reflect expectations of future OCR drops. One-year fixed rates have shifted to as low as 4.49%, easing pressure on households and opening the door for renewed market activity.
Matt and the team discussed how this shift could transform household budgets – a $1 million mortgage that once cost $75,000 a year in interest could soon fall closer to $45,000. That $30,000 swing represents real breathing room for many families and could help reignite consumer spending.
However, as James pointed out, not all the impact is immediate. Many Kiwis are still locked into fixed rates, meaning the benefits of lower interest rates will unfold gradually. Still, the panel agreed that the coming months could mark a turning point. As Matt put it, “We’ve been stuck in this cycle too long – it’s time to get things going again.”
Property Market Predictions
So, what does this mean for the housing market? Matt expects the real pickup will arrive by March next year, predicting a fast shift once confidence returns. With rates potentially dropping to around 4.2–4.3%, pent-up demand could finally be released as homeowners refinance and buyers re-enter the market.
James and Mike were more cautious but agreed that sentiment is shifting. More listings, renewed buyer interest, and steady price growth are already emerging. Still, mismatched expectations between sellers and buyers remain a hurdle – vendors are slow to accept current market values. As Matt noted, “Even when prices drop, people still want more than the market will pay.”
Matt also highlighted one constant amid changing conditions: New Zealand’s financial literacy gap. No matter where rates land, understanding how the OCR affects your mortgage and long-term strategy is critical.
Key Takeaways
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New Zealand’s economy is slowing faster than expected, increasing pressure for OCR cuts.
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Experts predict around 50 basis points of OCR reductions before year-end.
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Mortgage rates could fall to around 4.2–4.3% by early 2026.
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Lower rates could ease mortgage stress and revive property market activity.
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Inflation control remains the Reserve Bank’s top priority.
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Financial literacy is key – understanding the OCR helps you make smarter money moves.
Next Steps:
If you’re wondering what lower interest rates could mean for your household or investment plans, get in touch with the team at Lighthouse Mortgages. Whether it’s refinancing, restructuring, or leveraging equity to buy your next property – Lighthouse can help you take advantage of the opportunities ahead.
If you’d like to learn more, check out these other episodes below.
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Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
