Are mortgage rates near their turning point?
As economic indicators surge and risks re-emerge, economist Tony Alexander says New Zealand’ s current run of low mortgage rates may not last. What does this mean for buyers, sellers and homeowners heading into 2026?
A MARKET AT A CROSSROADS
New Zealand’ s housing and lending landscape has been inching back toward stability. Borrower confidence has been improving, sales activity is broadening, and the Reserve Bank of New Zealand( RBNZ) has spent the past two months shifting policy settings to support recovery.
However, economist Tony Alexander says the recent round of Official Cash Rate( OCR) reductions may have now gone further than necessary, with consequences for mortgage holders in the near term.
November’ s 0.25 per cent cut to the OCR, following the 0.50 per cent reduction in October, was designed to reinforce the economic upturn. Yet, Alexander believes, the chances are high that the RBNZ has cut interest rates too far, suggesting that the easing cycle may not align with what the latest data is signalling.
In fact, he warns that fixed mortgage rates could begin rising before Christmas as financial markets reassess the speed of the economy’ s rebound.
BUSINESS CONFIDENCE AT MORE THAN A DECADE HIGH
Alexander’ s assessment is grounded in a wave of stronger-than-expected economic figures released shortly after the latest OCR cut.
Recently, ANZ Bank’ s Business Outlook Survey reported: sharply from 58 per cent in October, and the highest reading since 2014.
• 53 per cent expect their own activity levels to rise, compared with 45 per cent previously, another 11-year high.
• Employment intentions lifted from 15 per cent to 19 per cent, though investment intentions eased slightly from 22 per cent to 20 per cent.
Other indicators paint a similar picture of strengthening activity:
• Retail spending rose 1.90 per cent in the September quarter, well above the 0.60 per cent market consensus.
• ANZ Roy Morgan Consumer Confidence firmed to 98.40 per cent, from 92.40 per cent.
• Inflation expectations two years out edged up from 5.10 per cent to 5.20 per cent.
• The proportion of businesses planning to raise prices sits at roughly twice the longterm average, consistent with inflation near 2.30 per cent.
For Alexander, these signals point to an economy gaining pace faster than expected.
“ The economic recovery is well underway,” he says, though he cautions that renewed household spending could prompt businesses to raise prices more aggressively, pushing inflation higher sooner than markets may anticipate.
• 67 per cent of businesses expect the economy to improve over the next year, up
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