Whether to fix short or long term is the question
ANZ says with house prices likely to remain flat or edge slightly down in the near term, the decision facing mortgage advisers is whether clients take out the longer fixed rates or opt for a series of one-year back-to-back fixes.
Tuesday, September 1st 2026, 6:39AM
by Sally Lindsay
The bank says there isn’t much difference in cost across two-year to five-year rates, with the mortgage curve basically flat at 5½% for two-years and out, in its latest Property Focus.
It’s more a question of whether locking in for several years at about 5.5% is something clients are prepared to do, given that it will initially cost more than fixing for one-year and will only end up being cheaper if the OCR averages about 3.5% or more over the relevant period.
While ANZ is forecasting the OCR to get to only 3% in this cycle, it is with some upside risk.
“A series of back-to-back one-year fixes may end up being cheaper if clients are prepared to forgo the certainty of a longer ix, but in this uncertain environment (the oil price, election uncertainty and the possibility of new housing taxes), that is arguably quite a valuable thing to leave on the table,” Sharon Zollner, ANZ chief economist says.
On the cost side of things is how longer-term rates stack up against shorter, cheaper alternatives.
“Breakevens are useful here as they can categorically answer the question of where rates need to get to in order for one choice to be better than the other,” she says
The first two rates to compare are the six-month and the one-year. The six-month at 4.79% is only 0.2ppt lower than the one-year at 4.99%. A 0.4ppt or more rise in the six-month rate would make back-to-back six-month fixes more expensive than a one-year fix.
“And that could easily happen, given that we expect 0.50% of OCR hikes before year-end,” Zollner says.
The next rates to compare are the one-year and the two-year. The one-year at 4.99% is 0.46ppt lower than the two-year at 5.45%.
That means a 0.92ppt or more increase in the one-year rate would make back-to-back one-year fixes more expensive than fixing for two-years.
“That could happen, but it’s a bigger jump than we are projecting. It reflects that financial markets expect more OCR hikes than we do.
“If we are right, a series of back-to-back on-year fixes may end up being the cheaper alternative if clients are prepared to forgo the certainty of a longer fix,” Zollner says.
Month-to-month volatility
On the housing side ANZ says prices remain broadly flat, with differing regional trends.
Underneath the national average, prices in Auckland and Wellington have trended down persistently since the market peak, while prices in the South Island have gradually increased over the past three years.
House prices were little changed in most regions last month, but this likely reflects normal month-to-month volatility rather than a change in the longer-running regional trends.
The bank still expects house prices to end the year slightly lower than they started, down 1%, and rise minimally next year, up 2%, as the economy recovers.
It reflects that recent weakness in the market hasn’t yet translated into falling average prices, but also that higher interest rates are likely to keep prices contained well into 2027, Zollner says.
Counterbalancing the headwinds of rising interest rates and election uncertainty, a gradual economic recovery is likely to provide some support to housing demand in the coming year, she says.
“The relationship between economic growth and house prices remains alive and well, as shown by the fact that house prices are rising in areas with stronger local economies (such as Canterbury, Otago and Southland) and falling in areas with weaker local economies (such as Wellington).
“But all up, we expect little movement in average nationwide house prices over the coming year.”
| « OCR Up: What the RBNZ said | How mortgage advice has changed: From the eyes of a veteran » |
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