After a couple of very challenging years for borrowers, 2025 has finally brought some relief. The Reserve Bank has cut the Official Cash Rate (OCR) to 2.25% following its November update.
So what might 2026 look like for home loan customers, and what conversations might they be having with their advisers?
Where things stand now
In its November Monetary Policy Statement, the Reserve Bank signalled that inflation is expected to ease back to around 2% by mid-2026, with economic activity gradually recovering. Lower mortgage rates are already starting to reduce debt-servicing pressure for many households.
At the same time, the Bank has indicated the easing cycle is well advanced. Commentary from economists, suggests the OCR is likely close to its low point, with any further cuts depending heavily on upcoming economic data.
For borrowers, that means the focus is shifting from “how low can rates go?” to “how do we plan for what comes next?”
Interest rate forecasts for 2026
A recent summary of forecasts published by Trade Me Property highlights the broad themes economists currently agree on:
Short-term rates (6–12 months): These may fall a little further in early 2026 following the November OCR cut, before flattening out. Many forecasters expect one-year fixed rates to hover in the low-to-mid 4% range.
Longer-term rates (2–5 years): Several banks believe these may already be near their lows. Some economists expect longer-term rates to start edging higher in late 2026 or into 2027.
OCR outlook: RNZ notes that most banks consider the OCR to be near its lowest point, with only a small chance of an additional cut. Over the longer term, some forecasts show a gradual upward path towards the late 2020s.
Forecasts are helpful, but they aren’t guarantees. Unexpected global or local events could shift the picture quickly.
Rules of the game: LVRs, DTIs and what might change
Loan-to-value ratios (LVRs): The Reserve Bank has confirmed that LVR restrictions will be eased, as noted in recent RBNZ updates. This gives lenders slightly more flexibility, particularly for low-deposit first-home buyers. However, limits still apply and responsible lending rules remain unchanged.
Debt-to-income (DTI) restrictions: DTI rules, introduced in July 2024, continue to apply. This means income, current debts and overall affordability remain central to approval decisions.
A new Financial Policy Committee
The Reserve Bank is establishing a new Financial Policy Committee in early 2026.
It won’t affect borrowers immediately, but it will play a significant role in shaping lending rules such as LVRs and DTIs over time.
What this could mean for different borrowers in 2026
- First-home buyers: Deposit hurdles may ease slightly with LVR adjustments.
- DTI rules and lender credit policies still shape how much can be borrowed.
- Planning for future changes (career moves, parental leave, lifestyle shifts) remains important.
Borrowers rolling off higher rates
Many fixed terms due for renewal in 2026 were originally set during a period of much higher rates. With one-year rates now lower, many households may feel some welcome easing in repayments.
Conversations may include:
- Whether to take advantage of lower short-term rates.
- Whether a longer fixed rate term provides helpful certainty.
- Whether splitting the loan over different terms helps spread refixing risk.
RNZ’s commentary noted that markets had already priced in the OCR cut, and with wholesale rates lifting slightly, economists expect more discussion about whether borrowers should consider fixing for longer terms.
Property investors
- DTI rules continue to limit high-debt investor borrowing.
- Lenders remain focused on rental income and buffers.
- The Reserve Bank expects future house price growth to be moderate and in line with income growth.
Key questions borrowers may ask their adviser
- How much rate movement could our household budget handle?
- Should we fix for a shorter or longer term?
- Would splitting the loan help manage risk?
- How do current LVR and DTI rules affect our plans?
- What refinancing or restructuring options make sense?
- What life changes do we expect in the next 1–5 years?
Making sense of 2026 with advice on your side
The big message from economists is that we’re likely close to the bottom of the rate cycle. Lending rules are evolving, and global uncertainty remains a factor.
For borrowers, 2026 will be a useful time to:
- Review loan structures
- Check buffers and affordability
- Talk through future scenarios with an adviser
Forecasts can be helpful, but personalised advice is what turns them into practical decisions. A conversation with a mortgage adviser is a good first step to understand options and make a plan that feels right for the year ahead.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.