RBNZ expects 45% of mortgages to reprice in the June and September quarters

The Reserve Bank expects about 45% of mortgages will be refixed in the June and September quarters with advertised rates for one and two-year fixed mortgages having fallen below 5% for the first time since 2022.

“This will improve household cashflow over the next six months,” the central bank said in its latest monetary policy statement.

It noted that the trend towards shorter-term and floating rates has started to reverse, noting that the share of new mortgage flows on floating and six-month rates decreased significantly in March.

“In March 2025, around 60% of new mortgage flows were directed towards terms of less than one year,” but that was down from about 90% in the preceding four months, it said.

RBNZ is expecting average mortgage interest rates to decline in coming quarters as more mortgage holders refix at lower fixed-term interest rates.

The central bank noted that residential investment declined 3.9% in the December 2024 quarter, which was sharper than the 0.9% fall forecast in the February monetary policy statement.

RBNZ is expecting that residential investment will recover from the second half of this year as lower interest rates and higher population growth support demand for new housing.

Uncertainty caused by US tariffs and fiscal policy is likely to result in “precautionary behaviour” by New Zealand firms and households, keeping the country's economic growth below its potential over the rest of 2025.

The central bank said households may reduce their spending and increase their precautionary savings if they are uncertain about their job and income prospects while businesses defer or cancel their investment plans.

RBNZ said it has factored the impact of this uncertainty into its forecasts, which show the economy growing only 0.3% in the current quarter and 0.2% in the September quarter before strengthening to 0.9% in the December quarter.

While its forecasts have only up to two further cuts in the official cash rate (OCR) following Wednesday's 25 basis point cut to 3.25%, it believes the unemployment rate, a crucial indicator for the mortgage market, is at about its peak of 5.2%.

RBNZ expects the unemployment rate will stay at that level until the December quarter, when it will decline to 5.1% and to 4.7% by the December quarter of 2026.

It expects the unemployment rate will reach 4.3% by the March quarter of 2028.