It’s been another busy few weeks, with the return of rising interest rates.
So let’s step back from the headlines and look at what’s happening, what it could mean for your mortgage, and what’s worth keeping in mind if you’re buying, selling or coming up for renewal this year.
Why are interest rates increasing?
On 8 July 2026 the Reserve Bank of NZ raised the Official Cash Rate (OCR) from 2.25% to 2.50%.(1)
Think of the OCR as the base setting for the cost of borrowing across the whole economy. When it moves, banks often adjust their own lending and savings rates to follow.
The decision followed several months of the OCR holding steady, and it wasn’t entirely out of the blue. In their announcement, the Reserve Bank pointed to a couple of things: inflation is still running above its 2% target, currently sitting above 3%(2), and ongoing global uncertainty from the conflict in the Middle East has made the outlook a little more difficult to read.(3)
If that's left you wondering what it actually means for your repayments, you're asking the right question.
What does this mean for mortgage rates?
Here’s the thing: an OCR increase doesn’t automatically flow through to every mortgage rate the same way or at the same time.
Floating rates tend to move closely with the OCR, so the link is fairly direct. Several major banks have already lifted their floating rates following the July announcement.(4)
Fixed-term rates are a little different. They’re influenced not just by the OCR, but by what banks and financial markets expect will happen down the track. That’s why some fixed rates had already started creeping up before the Reserve Bank’s July decision.(5)
The market had, in a sense, seen it coming.
Where rates head next is very difficult to call. It will likely depend on how inflation behaves, competition between banks, the health of our economy and whatever's happening overseas. Some economists expect rates to edge up slightly further during 2026, particularly at the shorter end(4), but no one can say that with certainty. And it's worth being wary of anyone who does.
Coming up for renewal? Here’s what’s worth thinking through
If your fixed-term mortgage rate is due for renewal, you're probably weighing up the age-old question: should I fix, float, or split?
There’s no universally “right” answer here. It depends on your income, your goals, how much certainty you want, and what you’ve got planned over the next few years. What suits your neighbour might not suit you at all.
Floating generally offers more flexibility. If you think your circumstances may change or you’d like the freedom to make extra repayments without break fees, it’s worth a look. The trade-off is that your repayments can go up or down as the OCR changes, so it suits people who are comfortable with a bit of movement.
Fixed is about certainty. Your repayments stay the same for the length of the term, which can make budgeting easier – but you can’t make unlimited extra repayments without incurring a break fee. If you’re planning to sell and repay your mortgage before the rate expires, for example, there might be a cost involved.
Different terms also come with their own trade-offs. Shorter terms may mean less commitment and more flexibility, but you're exposed to rate changes sooner. Longer terms lock in certainty for longer, but in the current market, they tend to come with a slightly higher rate.
Then there’s splitting your mortgage: fixing portions for different terms, sometimes leaving a portion floating. It's a way of spreading your interest rate risk while balancing flexibility with certainty.
The bottom line?
Trying to guess exactly where interest rates are heading is extremely difficult. Instead, you should build your mortgage structure around something you can predict: your own goals, plans and financial situation.
That's where a Mortgage Link adviser adds the most value. We take the time to understand your circumstances, explain the different options in plain English and help you land on a structure that works for you.
And what about the property market?
If you’re planning to buy or sell property this year, you may also want to stay up to date with what’s happening in that space.
The latest REINZ June Property Report(6) suggests the housing market has stayed relatively steady overall, despite everything going on around it.
Nationally, house prices have changed only a little over the past year. But that figure hides quite a bit of regional variation. For example, Canterbury and parts of the South Island continue to show some resilience, while conditions in other regions remain a bit quieter.
Buyers, meanwhile, seem to be taking their time. Rather than rushing in, many are comparing properties carefully, researching local markets and working through proper due diligence before making an offer.
If you’re selling, realistic pricing and a good read on local conditions are as important as ever – a conversation with a real estate agent can help with that. And if you’re planning your next move, a Mortgage Link adviser can help you understand your lending options early, so you're financially prepared when the right property comes along.
Keep the big picture in mind
Markets move. Interest rates change. Property cycles come and go. None of that is new, even if it doesn't always feel that way in the moment.
Staying informed is worth doing. But making sense of it all, and working out what it actually means for your situation, isn't always straightforward on your own.
If you'd like to understand how any of this applies to you, get in touch. A Mortgage Link adviser can help you explore your options and make more confident decisions about what comes next.
Sources:
- Reserve Bank of NZ - The official cash rate (OCR)
- Stats NZ - Consumer Price Index (CPI)
- Reserve Bank of NZ - OCR increased to 2.50% to return inflation to 2%
- RNZ - Banks increase rates after OCR rise - so what's ahead?
- 1News.co.nz - NZ's largest bank hikes some home loan rates
- Real Estate Institute of NZ - June 2026 Residential Property Report
Disclaimer: The information provided in this article is intended for general informational purposes only and does not constitute financial advice. Every individual’s financial situation is unique, and financial decisions should be made based on your specific circumstances and goals. We recommend consulting with a qualified financial adviser before making any investment, insurance, or mortgage-related decisions.
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