The reason rates rose, despite the OCR cut, was that traders in financial markets weren’t expecting the Reserve Bank to suggest, quite as strongly as it did, that it was unlikely to cut the OCR again in this cycle.

The surprising hawkishness of the Reserve Bank saw wholesale interest rates spike, which prompted banks to lift their longer-term mortgage rates by about 30 basis points throughout December.

As news of banks lifting rates trickled in, New Zealand Financial Services Group and Loan Market chief executive Bruce Patten said borrowers flocked to secure fixed mortgage rates.

“It was nuts,” he said, noting brokers were also busier earlier than usual after the holidays this year.

Exactly how much of a stampede there was will be known once the Reserve Bank releases its December mortgage data next month.

However, the window of time borrowers had to lock in longer-term fixed rates after the OCR cut and before they started rising was narrow.

The day after the November 26 OCR cut the Herald first reported the fact wholesale rates had shifted higher and quoted an analyst who believed mortgage rates would start rising in early 2026.

However, on December 9, Westpac announced it would lift its longer-term mortgage and term deposit rates by 30 basis points. Other banks followed, similarly lifting their rates, and/or doing away with the discounts they typically offer.

Economic data released since then suggests the New Zealand economy may not be as cool as previously assumed. December-quarter inflation figures due out on Friday will provide more of a steer on this.

But available data suggests it is highly unlikely mortgage rates will fall further.

The best time to have locked in rates for two or three years was likely November, when the largest portion of new mortgage lending done in a month since Reserve Bank records began in 2021 was put on floating interest rates.

Borrowers largely tended to opt for floating and shorter-term fixed rates throughout 2025 as they anticipated further rate cuts.

However, 49% marked an abnormally large portion of new lending being put on floating rates. The average since 2021 is 24%.

In November, 22% of new mortgage lending was fixed for a year, 10% for two years and 3% for three years.

Economist Tony Alexander believed there wasn’t much pressure on banks to lift mortgage rates again in the near-term.

Wholesale interest rates had dropped back. Reserve Bank Governor Anna Breman made a fairly unusual move, issuing a statement to talk the market down in mid-December. She discussed her call in an interview with the Herald a couple of days later.

While banks were worried their margins were being squeezed, as wholesale rates rose rapidly in early December, Alexander said they were now fatter.

Looking further down the track, he believed there would be some upward pressure on inflation and therefore mortgage rates.

While the OCR affects shorter-term rates, international money markets influence longer-term rates.

Looking abroad, monetary policy is expected to be tightened in Australia. Meanwhile, if US President Donald Trump pressures the Federal Reserve to cut interest rates to stimulate the economy, this could cause inflation – and therefore higher interest rates to get on top of it in the medium-term.

Alexander concluded that while the risk was that mortgage rates would drift higher throughout 2026, it was impossible to pick the speed at which they would move.

The Reserve Bank’s Monetary Policy Committee will next review the OCR on February 18.

The meeting will be Breman’s first as Governor and chairwoman of the committee.

Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.