It’s mid-March 2026, and if you’ve been keeping half an eye on the news, you’ll know there’s a fair bit going on both globally and locally.
We’ve had talk of oil shortages, ongoing conflict in the Middle East, and a whole lot of economic uncertainty floating around.
And naturally, it’s starting to make borrowers a little bit uneasy.
So let's dive into what some of these driving factors are, and what we can do about it.
Global uncertainty is pushing costs up (but that doesn’t mean panic)
One of the big things happening right now is the rising cost of oil.
And because New Zealand relies heavily on imports, when oil prices go up, so does the cost of pretty much everything else.
Fuel, transport, goods - it all flows through, and when costs go up inflation can follow, and did during the initial period of the Ukraine war a few years ago.
Now normally, when inflation starts creeping up, the Reserve Bank of New Zealand looks at increasing interest rates to slow things down and keep inflation within their target range of 1-3%.
But - our economy is still a bit fragile
Over the past couple of years, in New Zealand we've had a pretty sluggish economy, and have even dipped into recession territory, with a couple of quarters of negative growth.
So while inflation pressures might be building slightly, the Reserve Bank is reasonably unlikely to come in too aggressively with rate hikes, because they'll want to balance things carefully and not overdo it.
The biggest impact? Swap rates
This is the part most people don’t see, but it’s actually one of the biggest impacting factors behind the interest rates we see advertised on the bank websites.
Swap rates are essentially the cost for banks to borrow money, and those have been steadily increasing for the past year.
This means banks are now repricing their fixed rates, especially in the mid to long-term space.
That’s why we’re seeing:
3, 4, and 5-year rates creeping up
Banks adjusting pricing based on future risk
A bit of a “just in case” buffer being built in
Because from the bank’s perspective, if everyone locks in long-term rates now, and borrowing costs increase later, they’re exposed.
The activity we're seeing at the moment (this week most of the major banks have increased 2-5 year rates) are based on long term uncertainty and risk.
Shorter-term rates (like 6 months, 1 year, even 2 years) are much more influenced by the Official Cash Rate (OCR). And right now, the OCR is still on hold so those rates aren't moving much at all.
There’s a reasonable chance it stays that way for a bit longer, given the uncertainty in the economy. But the RBNZ has indicated that we may start to see some upward pressure into next year, which will likely affect short term rates too.
So what does all of this mean for your home loan?
At the moment there is a clear trade-off - the shorter term rates are the cheapest on offer, but the biggest uncertainty is around how long they'll stay where they are.
So plenty of borrowers are now starting to look to the mid term for consistency of repayments and cost of lending, and in some cases, also splitting lending to take advantage of both.
Locking in certainty is really good for people who:
Want stable repayments
Don’t want surprises
May have felt the pain of 6–7% rates recently
Have a period of lower income which may impact their ability to repay lending
Yes, it might be slightly more expensive than short-term rates right now… but it gives peace of mind.
Splitting lending across different terms is becoming really popular, and is about balancing certainty with flexibility, often with a lower amount short term with the majority in the mid-term.
This works really well if you:
Might get a pay rise
Plan to sell or move
Want to make lump sum repayments
Expect your situation to change
Every bank has slightly different rules around repayments and break fees, so it's important to chat with your adviser about this.
What might happen next?
What we’re seeing right now is less about panic, and more about pricing in uncertainty.
Broadly speaking, short to mid-term rates (1-2 years) are likely to stay stable this year, with perhaps a slight increase, and longer term rates are likely to continue to creep upwards.
The upcoming OCR review in a few weeks is still likely to be a hold unless there are some big surprises, but possible increases in 2026 and beginning of 2027.
The bottom line as always - get advice
There’s a lot of noise out there right now and it can be a bit scary when you're hearing headlines, rate changes and global events.
It's easy to feel like things are getting out of control.
Instead of trying to perfectly “pick” where rates are going, focus on these three things;
How much certainty do you want?
How much flexibility do you need?
What’s coming up in your life over the next few years?
Because the right structure will always beat the “perfect” rate.
And... book a call to chat with one of us 👇
