2026 Mortgage Rate Outlook: Scenarios, No Certainties!

The mistake is looking for one magic number, our key takeaways:

• The OCR is low relative to the peak, but future moves are data-dependent.

• Inflation has lifted above the 1–3% band again, which makes aggressive cuts less likely unless inflation clearly falls.

• Fixed rates don’t track the OCR cleanly because wholesale rates and expectations matter.

• The most practical approach for many borrowers is a structure that keeps flexibility without relying on a single forecast.

Let's dive in for more detail.

Rates move because the underlying drivers move: inflation, growth, offshore conditions, and what wholesale markets think the RBNZ will do next. That’s why a scenario-based approach usually leads to better decisions than trying to “pick the bottom.”

This article sets out a practical base case for 2026, plus the key upside and downside scenarios that could change the path.

If you’re refixing soon and want the “what do I do with my actual loan?” framework then start here.

Where we’re starting from in early 2026

The OCR is already much lower than the peak

The RBNZ cut the OCR to 2.25% in November 2025 and signalled that future moves depend on how medium-term inflation and economic activity evolve.

The important point for borrowers is not just “OCR is lower.” It’s “the easing cycle has already delivered a lot,” and from here the next moves will be more data-dependent.

Inflation has lifted above the target band again

The RBNZ’s own CPI series (sourced from Stats NZ) shows annual CPI inflation at 3.1% in the December 2025 quarter.

That doesn’t mean rates have to rise. But it does mean the RBNZ has less room to cut aggressively unless inflation clearly comes back down.

Fixed rates are driven by wholesale markets, not just the OCR

Even in easing cycles, fixed rates can move up or down depending on wholesale swap rates and expectations. If you want the plain-English explainer for why fixed rates don’t always follow the OCR then look at our recent article on this.

The 2026 base case: gradual improvement, not fireworks

Base case for the OCR: broadly steady, with a mild easing bias if inflation cooperates

The RBNZ’s November 2025 Monetary Policy Statement expected annual CPI inflation to return near the 2% midpoint in the middle of 2026, as pressures ease and spare capacity reduces underlying inflation.

Putting that together with inflation currently at 3.1% (Dec 2025), the base case is that the RBNZ stays cautious and moves only if the data gives them confidence inflation is falling back toward target.

Base case for mortgage rates: incremental gains for refixers, not a sudden drop

In this environment, borrowers typically see:

• Floating rates easing slowly (and sometimes lagging)

• Fixed specials remaining competitive, but moving around based on wholesale rates and bank competition

The RBNZ publishes a useful “special rates” series (B21), updated monthly. It tracks advertised special mortgage rates for borrowers who meet bank conditions.

Practical takeaway: in 2026, the headline direction can still be supportive, but you should expect ups and downs by term rather than a straight line lower.

The scenarios that could change the outlook

Scenario 1: Faster easing (the “inflation falls quickly” scenario)

This is the scenario where borrowers get more relief, sooner.

What needs to happen:

• Inflation trends clearly lower over the next 1–2 CPI prints, and

• The RBNZ is comfortable inflation is returning to the midpoint, not just “hovering near 3%.”

Why it matters:

• Shorter fixed terms (6–18 months) can become more attractive

• Floating becomes a more reasonable bridge for borrowers who value flexibility

What to do as a borrower:

• Consider splitting so you keep optionality without betting the entire loan on one path

• If your budget can handle it, keep a portion shorter-term to reprice sooner

Scenario 2: Sticky inflation (the “higher for longer” scenario)

This is the scenario where rate relief slows, and fixed rates might stop falling even if the OCR stays unchanged.

What needs to happen:

• Inflation remains above 3% for longer, particularly in “sticky” domestic categories

• The RBNZ stays cautious because cutting too fast risks inflation persistence

Why it matters:

• Longer fixed terms can look better than borrowers expect

• Wholesale rates can rise, pushing up 2–5 year fixed rates even without an OCR hike

What to do as a borrower:

• Prioritise certainty for the “sleep at night” portion of your loan

• Avoid over-committing to the shortest term just because it’s the lowest headline rate today

Read our guide on fixed vs floating when refinancing.

Scenario 3: Weaker growth or labour market (the “confidence drop” scenario)

This is the scenario where the RBNZ has more reason to support demand, and banks may start competing harder for quality borrowers.

What needs to happen:

• Clear signs demand is slowing and spare capacity is increasing

• A labour market deterioration that impacts confidence and spending

Why it matters:

• The OCR could have more scope to ease

• Bank appetite can become more selective, favouring clean, high-quality applications

What to do as a borrower:

• Strengthen your application profile and keep documentation clean

• Avoid leaving refix/restructure decisions to the last minute

Read more about how banks assess mortgage serviceability.

What this means for refixing decisions in 2026

Don’t try to “pick the bottom,” try to avoid the big mistake

The big mistake is locking everything into one term based on a single forecast.

In 2026, a lot of borrowers are better served by:

• Splitting across 1–3 terms (laddering)

• Keeping a modest portion floating if flexibility matters

• Using offset/revolving credit strategically if cash buffers are real and stable

If you want a full decision framework then check out our recent blog post.

Timing still matters, but structure matters more

If you can, start planning 60–90 days before your refix date. It gives you room to:

• Compare and negotiate

• Restructure splits

• Check break fees or cashback clawbacks if refinancing

If you’re considering switching then look at ways to optimise in a falling rate environment.

Our final word

The takeaways

• The OCR is low relative to the peak, but future moves are data-dependent.

• Inflation has lifted above the 1–3% band again, which makes aggressive cuts less likely unless inflation clearly falls.

• Fixed rates don’t track the OCR cleanly because wholesale rates and expectations matter.

• The most practical approach for many borrowers is a structure that keeps flexibility without relying on a single forecast.

Talk to one of our advisers

If you’re refixing or reviewing your mortgage in 2026, the best value usually comes from building the right structure and negotiating well, not guessing where rates land.

Our advisers can help you:

• Compare fixed terms and split strategies across lenders

• Decide whether floating, offset, or revolving credit makes sense for your cashflow

• Sense-check break fees and switching costs before refinancing

• Position your application for sharper pricing where possible

Get in touch and we’ll walk you through your options in plain English.