Right now, anyone needing to refix their mortgage is facing a tough challenge: trying to predict where interest rates are headed is far from straightforward. While there’s good news that rates are expected to drop, the big question is how much and when.

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The Reserve Bank of New Zealand (RBNZ) recently started lowering the Official Cash Rate (OCR) from 5.50% to 5.25%, signaling the start of an easing cycle aimed at reducing inflation. However, the road ahead is unclear, with ongoing debates about the pace and size of future rate cuts. Key upcoming data, like inflation figures and decisions from the US Federal Reserve, will play a crucial role in shaping expectations.

The RBNZ is targeting inflation within a 1-3% range, and early signs show that headline inflation could drop below 3%. However, domestic inflation, which is more within the RBNZ’s control, remains high. This cautious stance means the RBNZ may not cut rates as aggressively as some might hope, despite market optimism for steeper cuts.

Banks, which are offering reduced mortgage rates, are eagerly anticipating larger OCR cuts to maintain profitability. While the RBNZ forecasts the OCR to be around 4.75% by year-end, financial markets predict it could fall to as low as 4.25%.

Analysts like Capital Economics suggest even steeper cuts, predicting the OCR could drop to 2.25% by the end of next year. If true, this would represent a dramatic shift, offering substantial relief to mortgage holders.

Ultimately, homeowners looking to refix their mortgage will need to watch upcoming economic data closely. The October inflation figures may provide clearer guidance on where rates are heading, but until then, predicting the best time to lock in rates remains a challenge.-TIN Bureau