Please note this article appeared in our January 2026 newsletter. If you are interested in our current view on what is happening with interest rates, please click here.
There is no shortage of opinions about where the housing market and interest rates are heading next. Over the summer break, we have consolidated our own thinking and reviewed the latest research, reporting and commentary from industry experts on the key trends likely to impact on the mortgage and housing markets this year.
The consistent theme is not boom or bust, but stabilisation, improving confidence, and selective opportunity.
In its November update, the Reserve Bank of New Zealand lowered the Official Cash Rate to 2.25 percent on the back of easing inflation pressures and a slowing economy. Looking ahead in its most recent Monetary Policy Statement, it said inflation is “expected to return to around 2 percent by mid-2026”, which suggests inflation pressures are becoming more contained.
Subsequent comments from the new Reserve Bank Governor in December reinforced that while the OCR could still move if conditions change, rates are expected to remain relatively stable throughout 2026.
Bank economists have echoed this view. ASB’s Chief Economist, Nick Tuffley, has said the Reserve Bank “thinks it’s done” with imminent rate cuts, cautioning that expectations of significantly lower mortgage rates may be optimistic and that rates are “probably close to the bottom”.
From our perspective, 2026 looks like a year where many homeowners’ desire for certainty will matter more than chasing marginal rate movements. After several years of volatility, stable interest rates will allow households to plan, budget and make decisions with greater confidence.
While additional large drops in mortgage rates are not widely forecast, competition between lenders remains strong. Banks continue to compete through cash contributions, sharper pricing, and service levels.
Recent survey data suggests borrowers are becoming more pragmatic, shifting away from trying to perfectly time the bottom of the rate cycle and focusing instead on affordability, flexibility and long-term resilience.
In 2026, how your mortgage is structured will be just as important as the rate itself. We expect more borrowers to consider splitting their loans across multiple terms to help balance certainty with the ability to adapt if conditions change.
Forecasts from major banks and housing market analysts are relatively aligned for the coming year.
BNZ’s Chief Economist, Mike Jones, has estimated that national house prices could rise by around 4 percent in 2026, which is broadly in line with the Reserve Bank’s projections. Cotality’s Chief Economist, Kelvin Davidson, has also indicated a similar range of 4 to 5 percent, describing the outlook for the year as a gradual recovery rather than a sharp rebound.
As a Radio New Zealand journalist noted earlier this month, after several years of flat or downward movement, economists expect prices to “bend upwards”, but without the momentum seen in previous cycles. Some regions and property types may firm up earlier than others, but the national picture points to steady gains rather than rapid acceleration.
Many homeowners have experienced a drop in the value of their homes over the past few years, which has led to higher loan-to-value ratios (LVR) and more limited lending options. As house prices start to rebound, it is worth homeowners on the cusp of an 80 percent LVR or better re-looking at their rate options to see if they can secure a better deal.
Despite improving sentiment, several economists continue to describe current conditions as buyer friendly. In December, Nick Tuffley told RNZ it remains “very much a buyer’s market”, calling the current period a “unique window of opportunity”. He expects 2026 to bring a mild turnaround, with sales volumes lifting, listings gradually reducing, and prices edging higher rather than jumping sharply.
The next few months are likely to continue favouring buyers in many parts of the country, particularly those who are well prepared, decisive and able to take action. To put your strongest foot forward, we recommend buyers understand their borrowing capacity and have a clear financial plan in place.
Taken together, the majority of commentators suggest that 2026 will be a year of consolidation rather than extremes.
From our perspective:
After several disruptive years, 2026 looks set to reward preparation, clarity and sound advice. Stability in interest rates and a measured housing recovery create an environment where informed decisions matter more than fast ones.
If you would like to sense-check your plans for 2026, whether that’s refixing, refinancing, buying or reviewing your longer-term strategy, we are here to help you navigate the options with confidence.
To book a free review and get your financial strategy sorted, click here.
The content of this article should not be taken as financial advice, or a recommendation of any financial product. These insights are based on current economic commentary, market pricing for interest rates, and our personal opinion. Threefold is not liable or responsible for any information, omissions, or errors present.