The era of falling interest rates is almost over. Over the past year, mortgage interest rates have dropped sharply — the average one-year fixed interest rate has fallen from 7.5% in 2024 to around 4.97% today, a drop of 250 basis points. But the biggest declines are likely behind us, and the window to lock in a low rate is narrowing.
At Mortgage Masters, we’ve been tracking every shift in the market to help our clients make smart, timely decisions. Here’s what you need to know.
Where Things Stand Now
In July 2025, the Reserve Bank of New Zealand (RBNZ) kept the Official Cash Rate (OCR) at 3.25% after six consecutive cuts from its peak of 5.5%. This is the lowest level since August 2022 — and while one more cut is likely, rates are close to their floor.
Current lowest advertised mortgage interest rates:
- 1-year fixed: from 4.89%
- 2-year fixed: around 4.95%
- Floating: 6.35% – 6.95%
How Low Can They Go?
Bank forecasts vary slightly, but all agree we’re near the bottom:
- Aggressive outlook: OCR dropping to 2.5% (ANZ, Kiwibank), or 2.75% (BNZ).
- Conservative outlook: OCR bottoming at 3.0% (ASB, Westpac).
That means 1-year fixed interest rates could fall to 4.5–4.7%, and 2-year rates to 4.7–4.9%.
The August 20th Decision: The Likely Turning Point
Markets expect one final 0.25% cut in August, bringing the OCR to 3.0%. That could be the last major move before rates stabilise into 2026.
Why Interest Rates Are Falling
- Inflation in check: Annual inflation is at 2.5%, well within the RBNZ’s target.
- Economic softness: GDP contracted 0.7% in Q1, unemployment is up to 5.1%, and business confidence remains low.
- Housing market: Showing signs of recovery but still slow-moving.
What This Means for You
If You’re Refinancing
This is your moment — but timing matters.
- Wait until after the August OCR decision before fixing.
- Consider shorter 1–2 year terms for flexibility.
- Compare cashback offers
Mortgage Masters Tip: We can shop around multiple banks for you to secure both the sharpest rate and the best cashback deal.
If You’re a First-Home Buyer
You’re in the best position in over two years:
- Lower servicing costs improve affordability.
- Slower price growth means less competition and more time to choose the right home.
- New DTI rules are more manageable at today’s interest rates.
Mortgage Masters Tip: We can get you pre-approved now so you can move fast when you find the right property.
