Refixing this spring? Where mortgage rates sit before the 28 October OCR decision

A borrower refixing a home loan this week will find the cheapest one-year rate at the big banks is 4.95%.

Kiwibank offered that rate in the rate table that Opes Partners, a mortgage broker and property investment firm, published for Thursday 8 October. The same table lists the lowest six-month rate at 4.75% (Kiwibank and Westpac) and the lowest two-year rate at 5.39% (Kiwibank). Westpac had the lowest three- and four-year rates, both 5.39%. BNZ and Westpac shared the lowest five-year rate, 5.49%.

Those are the six major banks only. News site Newswire reported in September that some smaller lenders, including China Construction Bank, were still advertising one-year rates under 4.5%.

Many borrowers coming off fixed terms this spring locked in when rates were falling. Opes says the official cash rate (OCR) fell 3.25 percentage points from its 5.5% peak, with six cuts in 2025. Then the Reserve Bank changed direction. Opes and Newswire both say it raised the OCR by a quarter point on 8 July and again on 2 September, taking it to 2.75%.

Inflation is the reason. Annual CPI inflation was 4.1% in the June quarter, above the Reserve Bank's 1-3% target band. Opes says much of the rise came from higher fuel prices after the Middle East conflict, and that the Reserve Bank expects inflation to stay above 3% for the rest of 2026.

Forecasters disagree on what comes next. ANZ economists led by chief economist Sharon Zollner, in a note published on 21 September, forecast a quarter-point rise on 28 October, a pause in December, then rises in February and March 2027. That would take the OCR to 3.5%, up from ANZ's earlier call of one more rise to 3%, Newswire reported. BNZ projects a quarter-point rise at every meeting until the OCR reaches 3.75%. ASB is sticking with 3.25% by the end of the year. Opes expects one more rise, to 3% by December.

Kiwibank is the outlier. Interest.co.nz quoted its economists calling an October rise premature: "But when the economy is still in embers, now is not the time to be dousing it with water." BNZ head of research Stephen Toplis took the opposite view in comments the site reported on 17 September: "we now think the Reserve Bank has no choice but to raise the cash rate 25 basis points in October."

Financial markets expect more than any bank forecaster. ANZ's note said markets were pricing a peak OCR of around 4%. Opes says the Reserve Bank's own September track has the OCR rising gradually to about 3.2% over two years, with the bank saying it "may need to increase further" but that the path isn't predetermined.

The rises reached rate cards quickly. Interest.co.nz's rate table, cited by Newswire, shows BNZ raised most of its fixed rates in September. Its one-year rate rose 0.20 percentage points to 5.19% and its five-year rose 0.26 points to 5.75%. Its one cut was to the two-year rate, down 0.10 points to 5.35%. Those are mid-September figures; banks have changed rates since, and Opes's 8 October table has BNZ's five-year at 5.49%. Westpac and TSB also changed rates in September, mostly upward but with some cuts.

Floating borrowers have had a worse deal in past cycles. Financial Markets Authority data published in September, cited by Newswire, showed floating rates took the full OCR rises but only part of the cuts. Opes says floating rates are often more expensive than fixed. Floating rates do let borrowers make extra repayments, restructure, or lock in a new rate without paying break fees.

For anyone refixing now, the advertised rates may not be the rate on offer. Opes says banks' "special" rates usually apply to borrowers with at least 20% equity. Borrowers with less may be offered the standard rate, or the standard rate plus a low-equity margin.

Choosing a term is a bet on where rates go. A longer fix protects against further rises but costs more if rates level off or fall. Newswire reported that ANZ expects the two-year swap rate, which drives many fixed mortgage rates, to hold around 4%. On housing, ANZ said "the combination of higher rates, policy uncertainty, rising user costs (insurance and rates) are likely to keep the market flat for some time."

Borrowers with a few weeks before their fixed term ends have several dates to watch. Stats NZ releases September-quarter inflation figures on 22 October. The Reserve Bank's OCR decision follows on 28 October, 10 days before the 7 November election. Opes says the last decision of the year, on 9 December, comes with a new Monetary Policy Statement and an updated OCR track.