Mortgage Strategy Update: Making the Most of Lower Interest Rates

The Official Cash Rate is currently 3% and is expected to fall again today. Economists forecast it could reach around 2.25% by the end of the year.

Interest rates in New Zealand have been falling for some time and are expected to continue trending lower as the Reserve Bank supports a slowing economy. GDP fell 0.9% last quarter, inflation is easing toward target, and business confidence remains soft.

In this environment, the focus is not on whether rates will fall, but how far and how fast they will continue to move. That makes it important to think carefully about how your mortgage is structured.

The one year fixed rate is currently our most preferred option for refixes and new lending. It is also the choice most of our clients are selecting.

It usually provides the lowest rate available and gives you flexibility to refix sooner if rates continue to move lower. Staying close to the market allows you to benefit earlier as reductions flow through.

While the one year term is preferred if you have to choose one, splitting your mortgage across different fixed terms remains an effective way to manage risk.

A split structure smooths repayments and avoids having the entire loan refix at the same time. It balances flexibility with security.

For example

50% fixed for one year to capture lower rates sooner

30% fixed for two years for added stability

20% fixed for three years for longer certainty

This approach ensures part of your loan adjusts as rates continue to fall, while part stays protected if the pace of cuts slows.

When longer terms may still suit

A longer term such as four or five years can provide peace of mind if you value absolute certainty or have a tight budget.

In a market where rates are continuing to decline, these terms will often cost more over time, so they should only be chosen where stability is the main priority.

No one can predict the exact path of interest rates.

Rather than trying to pick the perfect moment, focus on building a structure that fits your goals, cash flow, and comfort with risk.

Interest rates in New Zealand have been falling and are expected to keep falling toward a base near 2.25%

For most borrowers, the one year fixed rate remains the most attractive option, and splitting across different terms continues to be an excellent way to manage risk and maintain balance.

This is general guidance only. The right structure depends on your cash flow, loan size, and long-term goals.

Contact us to review your options and build a mortgage strategy that fits your situation.