Kiwi mortgage holders are counting on a belated Christmas gift – eight weeks after December 25 – from the Reserve Bank of New Zealand (RBNZ), when the central bank’s board next meets, according to the Finance and Mortgage Advisers Association of New Zealand (FAMNZ).

FAMNZ country manager Leigh Hodgetts said that while Christmas is a time when consumers often spend too much, this year many will be cutting back due to the pressures from high interest rates.

“We know that New Zealanders are still doing it tough and are sacrificing, but if economists are correct and there is another 50 basis point cut on February 19, this will be the Christmas present they want, and they won’t mind waiting.”

“This will be the fourth cut in recent times and we will see mortgage repayments become more manageable for most borrowers,” she said.

Positive signals

Hodgetts pointed out that RBNZ has signalled the likelihood of further rate cuts in early 2025, with a long-term goal of achieving a neutral OCR (around 3 per cent) by mid-2026.

“If this happens, the reduction is expected to influence shorter-term mortgage rates, which are already trending down.

However she fears banks may decide to be the late-Christmas grinch and not pass on the full cuts, if and when they occur.

“Banks have a habit of passing on rate increases immediately and in full, but they don’t always act this way when rates fall.

“If this happens, there will be some consumers seeking a better deal elsewhere.”

She said lower rates in 2025 will benefit mortgage holders who have opted for floating rates and provide opportunities for fixed-rate borrowers to secure lower rates as they renew.

“Lower rates could also help property prices stabilise further and this will encourage activity from first-home buyers and investors.

“It will certainly be positive for consumers and the overall economy, so let’s hope Santa comes late and we can extend the festive season to February.”