Could Home Loan Rates Drop Below 4%?

Home loan interest rates in New Zealand are steadily dropping as the Reserve Bank lowers the official cash rate (OCR) and wholesale markets soften. With nearly half of all home loans floating or up for refix within six months, many borrowers are asking — could rates soon dip below 4 percent? Reported by RNZ

Yes, say some experts.
Squirrel CEO David Cunningham believes it’s possible. He said if the OCR falls to 2.25 percent as expected, one-year fixed mortgage rates could slide under 4 percent in early 2026.
“The key driver will be lower term deposit rates and cheaper bank funding,” Cunningham explained. Squirrel’s AI rate-prediction model suggests sub-4 percent rates are on the horizon — and with banks’ tendency toward “charm pricing” (like 3.99%), at least one lender may move early to grab attention.

Others disagree.
Infometrics chief forecaster Gareth Kiernan says a rate below 4 percent is unlikely unless the OCR falls closer to 2 percent.
“In 2019, rates only dipped below 4 percent when the OCR sat at 1.75 percent for over two years,” he noted. “With current long-term rates anchored higher, it’s a stretch for now.”

While borrowers hope for sub-4 percent mortgages, economists remain cautious — suggesting the window for ultra-low rates may still be months away.

He said another 25 basis points off the OCR did not look like enough to get any of the wholesale rates down enough to get a rate under 4 percent.

"Particularly when longer-term rates seem to be more well-anchored at higher levels. I think you'd need to get an OCR of 2 percent before sub-4 percent becomes a possibility, at least from the big five banks - sometimes the smaller lenders can go a bit more off-piste with their rates to try and attract a bit of attention."

Kiernan earlier said he expected home loan rates to start picking up again in about October next year.