Key Facts

  • Economists predict the Reserve Bank of New Zealand (RBNZ) could reduce the cash rate from August 2024, leading to lower mortgage interest rates by late 2024.
  • The RBNZ has maintained the Official Cash Rate (OCR) at 5.5% as of November 29 and anticipates no reductions till mid-2025.
  • BNZ chief economist Mike Jones predicts that the OCR will start decreasing from August 2024, aligning with the views of economists at Westpac, Kiwibank, ANZ, and ASB.
  • Westpac is the only bank forecasting further OCR hikes in 2024, in accordance with the RBNZ’s outlook.
  • ASB’s chief economist, Nick Tuffley, forecasts mortgage interest rate cuts by the end of 2024 and OCR reductions in February 2025.
  • About 20% of mortgage holders currently hold interest rates at or below 3%, with some having fixed their rates for up to five years in 2021 to avoid interest rate rising.
  • ANZ economist Andre Castaing and Westpac chief economist Kelly Eckhold suggest no OCR reductions until 2025, though they believe mortgage interest rates will fall by the end of 2024.

Article Summary

Despite the Reserve Bank rhetoric, most economists predict interest rate cuts in late 2024. The Reserve Bank of New Zealand might adjust the cash rate from August 2024, causing the mortgage interest rates to reduce towards the end of 2024. However, caution is required as the Reserve Bank might run out of patience to control inflationary pressure. This prediction comes in spite of the Reserve Bank maintaining the OCR at 5.5% on November 29, which suggests no cuts until mid-2025 to combat market exuberance.

Notably, BNZ chief economist Mike Jones presumes August 2024 to be the turning point for OCR and expects mortgage interest rates to trend downwards in the last quarter of 2024. This view is also supported by economists at Westpac, Kiwibank, ANZ, and ASB. However, among these, Westpac is the only bank that predicts more OCR hikes in 2024, in line with Reserve Bank’s forecast. Despite this, Jones is optimistic about falling inflation.

On the other hand, ASB’s Nick Tuffley believes that mortgage interest rate cuts will occur by the end of 2024, but expects OCR cuts only by February 2025. He also notes that around 20% of the current mortgage holders have interest rates at or below 3%, with a good chunk of them having fixed their rates for up to five years in 2021, thereby avoiding the brunt of interest rate hikes so far.

In contrast, Andre Castaing of ANZ and Kelly Eckhold of Westpac are more conservative, predicting no OCR cuts until 2025. However, they both predict fall in mortgage interest rates by the end of 2024. Eckhold anticipates OCR reductions only in early 2025, in line with increased migration and the Reserve Bank’s altered house price forecast.

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