‘Probably at the turn now’ on interest rates, Westpac chief economist says

Thursday, 11 December 2025

After Westpac hiked some fixed-term mortgage rates earlier this week, the chief economist of Westpac says interest rates have “probably” reached their lowest point in this cycle.

On Tuesday, the bank said it was increasing its two to five-year rates by 30 basis points in the wake of the most recent OCR update in November.

Speaking on Herald Now on Thursday, Kelly Eckhold said the impression from the financial markets was that interest rates were the lowest they were going to get for the foreseeable future.

The Reserve Bank’s own forecasts don’t suggest interest rates will be rising in 2026, however, Eckhold believes things could happen sooner than predicted.

“I think there is a chance that things will happen a lot sooner than what the Reserve Bank says, and a lot sooner than what economists think as well.”

On the question of whether other banks will follow his bank's lead, Eckhold said “everyone is in the same boat”, but that you cannot assume market rates will stay at this level for a long period of time.

“I think it is likely that the market has overshot here and that in time these rates will come down a bit.”

Eckhold said interest rates have been increasing globally, with Australia, Canada, and South Korea all seeing rises.

“Australian interest rates are up by quite a large amount, 50bp over the same period. Canadian and Korean interest rates have been rising as well.”

“It's part of a global trend that after a long period of easing, we are probably at the turn now,” he said.

Earlier this week, Eckhold told Stuff that in the week following the Reserve Bank’s decision to lower the OCR to 2.25%, they began seeing wholesale interest rates move in the opposite direction.

Given this, Eckhold said now would be a good time to think about locking in a longer-term rate.

“The implication is that this is the time of the cycle where any borrower should consider hedging against the possibility that rates start rising.”

“The fact that those longer-term wholesale rates have already risen is narrowing the margins that banks have, so there is an increased chance that longer-term mortgage rates start to rise…

“So, now you've got to [question] if this is as low as it gets. And if that's the case, then the benefits of going longer look more attractive,” he said.

Stuff’s Money Editor Damien Venuto explored the issue here.