But, of course, this is my best guess; no-one knows for sure. The exact numbers will likely be wrong, but it’s the general direction we're trying to pick.

It’s also important to recognise that interest rates impact investors differently: 

• Homeowners and property investors care about mortgage interest rates; the lower, the better.
• Savers tend to care about term deposit interest rates. The higher, the better.
• Younger people might care more about credit cards and personal loan interest rates; the lower, the better.
• While economists care about the OCR. They want it higher or lower based on what’s happening in the economy.

So, let’s go through the different interest rates and how they might impact your investments and properties.

Where will the OCR head next? (OCR Predictions)

The OCR is the Reserve Bank's interest rate. It influences other interest rates. At the most recent OCR decision in February 2026 the Reserve Bank chose to hold the OCR at 2.25%.

The Reserve Bank publishes an OCR track alongside each Monetary Policy Statement. This shows where they expect the OCR to go over the next few years. It’s not a promise, but it’s the best signal we have of what the RBNZ is thinking.

They last updated their OCR track on February 17, 2026. The RBNZ’s latest track suggests the OCR will average to 2.38% in the December 2026 quarter. 

Since 2.38% sits roughly halfway between 2.25% (no hike) and 2.5% (one hike), that implies roughly a 50/50 chance of a single increase by December 2026.

Other banks think there will be more OCR increases than the Reserve Bank is suggesting. Here are the major forecasters’ predictions for what the OCR will be by December 2026:

Only ASB currently predicts there will be no OCR increase in 2026. ANZ and Westpac both forecast one OCR increase. 

At Opes Partners we’ve reviewed forecasts from all major sources. We predict one OCR increase in 2026. Our forecast sits in the middle of other expert predictions. We came to this prediction by considering the risk of further inflation. However, we also recognise the New Zealand economy is still recovering.

If the banks are correct and there is an increase in the OCR, it will be a change from the most recent OCR decisions:

• February 2025 – 0.5% cut from 4.25% to 3.75%
• April 2025 – 0.25% cut to 3.5%
• May 2025 – No change. OCR remained at 3.5%
• July 2025 – 0.25% cut to 3.25%
• August 2025 – 0.25% cut to 3%
• October 2025 – 0.5% cut to 2.5%
• November 2025 – 0.25% cut to 2.25%.
• February 2026 – No change. OCR remained at 2.25%

That represents a total decrease of 2 percentage points throughout 2025 and 3.25 percentage points since the peak in 2023.

The Reserve Bank meets 7 times a year to review the OCR. The remaining 6 meetings for 2026 are:

• April 8, 2026
• May 27, 2026
• July 8, 2026
• September 2, 2026
• October 28, 2026
• December 9, 2026

More from Opes Partners:

• What are the current interest rates in NZ? (Article)
• The latest interest rate changes from the main banks (Article)
• What interest rate should I choose? (Article)

What’s the relationship between the OCR and inflation?

The Reserve Bank uses the OCR to influence inflation because the bank’s job (mandate) is to keep inflation between 1-3%.

In 2022, inflation leapt to 7.3%. The Reserve Bank responded by hiking the OCR up to 5.5% from 0.25%, a massive 5.25% jump. 

To understand why they did this you need to ask yourself: “What makes inflation go up?”

We economists often say, “It’s too much money chasing too few goods.” Put more simply, interest rates were too low coming out of Covid-19, so Kiwis were spending lots of money. 

That meant businesses could put their prices up without losing too many sales, and that’s inflation … businesses putting up their prices. 

What’s the Reserve Bank to do? They hike up interest rates. That means borrowers have to pay more in interest to the banks for our mortgages, so we have less money to spend. 

That makes the economy tough for businesses, which means they can’t increase their prices as fast, so inflation drops. 

Now that inflation is down the Reserve Bank could start bringing interest rates down. 

As long as inflation stays low, the Reserve Bank has the space to bring the OCR down, and that means other interest rates (like your mortgage and term deposit rates) can also fall. 

Inflation forecasts for 2026 - 2029

The Reserve Bank’s job is to keep inflation between 1-3%. CPI inflation is at 3.1% as at December 2025, which is just outside the target band.

However, all major banks, the Reserve Bank, the Treasury and the NZ Institute of Economic Research, forecast inflation to be between 1.9-2.3% by December 2026, so despite the fact inflation is outside the target band, there is little risk of an inflation spike.

That’s because a large chunk of inflation is coming from administered inflation … things like council rates and electricity. Administered inflation is sitting at 8.7% as of December 2025. These are factors the Reserve Bank can’t control.

Raising the OCR won’t change any of that. Councils don’t dial down rates because the OCR goes up, they just set their budgets and send you the bill. So, the Reserve Bank is watching what it can control. 

The make-up of inflation also matters. 

Economists often break down inflation into: 

• domestic (non-tradable inflation),
• and imported (tradable) inflation. 

In 2026, domestic inflation (the stuff we can control) is coming down, but imported inflation has gone up. 

The Reserve Bank said it expects inflation to be 2.1% by March 2027. That’s why they’re calm right now.

Mortgage interest rate predictions for 2026 and 2027

While other banks publish OCR forecasts, ANZ is the only major bank that publishes specific mortgage interest rate predictions.

ANZ thinks the 1-year interest rate has hit its bottom. 

It expects the 1-year mortgage interest rate will be 5.2% by December 2026 and 5.5% by September 2027. This is based on their most recent projections that were released in February 2026.

If we look at the other mortgage interest rates and ANZ’s predictions for 2026 and 2027, ANZ thinks:

• The 2-year rate will reach 5.3% by December 2026, and 5.5% by September 2027
• The 3-year rate will reach 5.5% by December 2026, and 5.6% by September 2027
• The 5-year rate will reach 5.9% by December 2026, and 6% by September 2027

At Opes Partners, our mortgage interest rate predictions are that the 1-year rate will reach:

• 5% by March 2027, and
• 5.25% by March 2028

This means we think the 1-year rate will be slightly lower than ANZ is forecasting. We came to this conclusion after reviewing all relevant forecasts. We also considered how inflation and the economy might evolve over the coming years.

Long-term mortgage interest rate predictions for 2027 and beyond

Previously, I’ve always thought the 1-year mortgage interest rate would end up around 4.5%.

These days, I think that will be closer to 5.25%.

Of course, interest rates will sometimes be higher and sometimes lower. The future is uncertain (after all, it hasn’t happened yet).

But one way to approximate the long-term 1-year mortgage interest rate is to look at the neutral OCR. 

This concept of neutral OCR means they’re not trying to speed up the economy (to get inflation a bit higher). 

At the same time, they’re not trying to slow down the economy to get inflation down.

Back in 2022, they used to estimate that the long-term neutral OCR was around 2.25-2.5%.

The Reserve Bank has predicted the neutral OCR is closer to 3%, as of February 2026.

So, how do you get from estimating the neutral OCR to predicting the 1-year mortgage interest rate?

Looking back over the last 20+ years, the average difference between the OCR and the 1-year fixed rate is 2.24%. That’s about as close to 2.25% as you can get.

There are differences from month to month, but the pair follow the same broad trend over time. If the long-term neutral OCR is around 3%, then the 1-year rate should hover around 5.25% over the long term.

Predictions for term deposit, credit card and other interest rates 

Remember, there are lots of interest rates. It’s not just mortgages and the OCR, so let’s look at some of the other interest rates. 

Term deposit interest rate predictions

If you are a retiree or have a lot of money – you probably care about the term deposit rates. This is how much the bank will pay you to lend them your money for 30 days – 5 years.

It’s important to realise that term deposit and mortgage rates go hand in hand.

To lend you money for a mortgage – the bank first has to borrow the money from someone else. One of the big places banks get money is through term deposits.

If the 1-year mortgage interest rate goes up, so does the 1-year term deposit rate. 

The 1-year mortgage interest rate is typically 1.2% above the 1-year term deposit rate. That’s been the median margin since 2002. 

So, if mortgage interest rates go up, term deposit rates will likely follow. 

That’s good news for savers. 

Credit card and personal loan interest rate predictions

Many Kiwis take out personal loans or have debt on a credit card. So you might wonder – “OK if the OCR stayed the same … what will happen to my credit card interest rate?”

The answer is – “not much.” 

That’s because the OCR has a big impact on some interest rates and not on others. 

For instance, the floating mortgage interest rate is correlated very strongly to the OCR. If the OCR goes down by 0.5%, the floating interest rate will usually go down by 0.5%. 

But it’s a different story for credit card interest rates. Yes, generally, if the OCR goes down so do credit card interest rates, but the trend is weak. 

Between September 2021 and May 2023, the Reserve Bank hiked the OCR by 5.25%, but the effective credit card interest rate only went up 0.7%. 

Since then, the OCR has dropped 3.25%. Meanwhile, the average effective credit card interest rate has only dropped 0.1%. 

Currently, the effective credit card interest rate is close to 20%. The median over the last 10 years has been 18%. 

Even as the OCR drops – don’t expect credit card interest rates to drop much. They’ll likely stay around 18-20%, although it really depends on which credit card you have.

Credit cards with more benefits tend to have higher interest rates; those with few extra benefits tend to have lower rates.

How interest rates impact house prices

Most people take out a mortgage when they buy a house. Around two-thirds of houses in New Zealand have a mortgage. 

So when interest rates fall, borrowers can take on more debt while keeping their repayments the same. 

For instance, if you take out a $500,000 mortgage at a 7% interest rate, you’ll pay $3,327 a month back to the bank. 

But if interest rates fall to 5%, then you can afford to take out a $620,000 mortgage and keep that repayment the same. That’s why lower interest rates tend to push up house prices. 

Similarly, when you apply for a mortgage the bank will test your mortgage application with a high interest rate. This is to make sure you can afford your mortgage even if interest rates go up. 

As interest rates fall, the banks lower these servicing test rates. 

This combination means that as interest rates fall, borrowers are willing and more able to take on more debt to pay for a house. This tends to push up house prices. 

However, when interest rates start rising, so will servicing test rates. 

How interest rates impact your investments

Changing interest rates impact your investments in different ways.

Term deposits

Term deposits make less money when interest rates fall, more when they go up. Let’s say you could get a 6% interest rate for 1 year while term deposit rates were high. 

That means for every $100,000 invested, you’d make $6,000 a year. 

But if term deposit rates fall to 4%, then for every $100,000 you invest you then only make $4,000 a year. 

This is why economists often say climbing interest rates hurt borrowers but benefit savers.

Shares

Share prices tend to go up when interest rates are down. That’s because there is less incentive to invest in shares and funds when interest rates are high. 

Why’s that? Well, term deposits are safer than shares; they have less risk. You know what your return is up front, and that return is fixed. You don’t get that with shares. 

So, when interest rates are high, term deposits have a higher low-risk return. Some investors will switch from shares to term deposits and that decreases demand for shares, and prices tend to stabilise or go down. 

But, it’s the opposite when interest rates go down. The return from term deposits is smaller, so investors switch to shares. This increases demand for shares, pushing prices up. 

How long should I fix my mortgage interest rate for? 

My personal go-to mortgage strategy is to fix my mortgages for the 1-year rate, no matter what.

Previously, this has led to a low average interest rate.

Right now we’re probably at the bottom of the interest rate cycle. 

So, if you’re fixing soon, shorter terms might win in the short run, but don’t completely forget about longer terms. 

If you believe an interest rate rebound is coming, those longer-term fixes might start looking more attractive.

Make sure you talk to your mortgage adviser to choose the right rate for you. 

What if your interest rate forecast is wrong?

Some investors ask, “What happens if your forecasts are wrong?”

They will be: you can’t predict the future with 100% accuracy.

They are just best guesses based on the facts we have today. When the facts change, we change the forecast.

Surprise economic events can throw any forecast off.

If the economy recovers faster than expected, interest rates will rise sooner. 

If the economy stays sluggish or unemployment remains high, interest rates could go lower still.

And then there are the wildcards. Who knows which countries could invade each other next, or what Trump will announce next Thursday? 

I can’t see (or predict) any of that, so those surprises aren’t factored into my forecast.

Sure, no-one can predict the future, but that doesn’t stop us from trying.