The RBNZ Governor said ‘medium term’ 17 times – here’s what that means for your mortgage

Tuesday, 24 March 2026

Your mortgage options just got more expensive — and it has nothing to do with anything happening in New Zealand.

A conflict thousands of kilometres away is pushing up wholesale money market rates, forcing banks to lift longer-term mortgage rates here. (Those wholesale rates are integral in determining how much it costs banks to access the money they lend to us.)

The Reserve Bank says it’s staying calm. Markets clearly aren’t.

In a speech today on the impact of the Iran conflict, RBNZ Governor Anna Breman used the phrase “medium term” 17 times, signalling the central bank won’t rush to react to short-term inflation spikes driven by higher fuel costs.

Right now, the Reserve Bank is clearly caught between market nerves and its own strategy for keeping a lid on inflation – and this tussle has consequences for your mortgage rates, making it more complicated to decide what your next move should be.

The unrest in Iran has led to the wholesale market pricing in four OCR hikes by February 2027, accelerating well beyond anything the Reserve Bank has suggested so far.

Major banks, including Kiwibank, Westpac and ASB, have already responded by lifting their longer-term fixed mortgage rates (ranging from two to five years).

In her speech, Breman stressed that the bank intends to “look through” the first round of direct and indirect effects and focus on the medium-term.

“The Reserve Bank is making it clear this is not a shock to react to blindly,” notes Jeremy Sullivan, an investment adviser at Hamilton Hindin Greene.

The near-term risks are clear: higher fuel costs will lift inflation as everything becomes more expensive to manufacture and more expensive to move from A to B. We’re talking everything from lettuce to beef to bread.

The question, however, is how long that lasts and whether it becomes embedded in the economy.

“That is where central banks can get caught out,” says Sullivan. “Tighten too early and you risk adding pressure to an economy already losing momentum. Wait too long, and inflation can become more entrenched.”

Breman made it clear today that the Bank will not hike rates in response to these near-term effects, but that it will act to ensure temporary inflationary spikes do not turn into an enduring problem.

Despite the higher pricescaused by fuel-price increases, Breman notes that circumstances differ today from the last time inflation took hold after theinvasion of Ukraine.

Petrol prices spiked then, but businesses had stronger balance sheets and Kiwis had more savings – meaning they had money to spend.

That is not the case today. Kiwis have less money, and businesses have far less ability to pass those prices on to their customers, which could keep a lid on inflation.

If that is the case, and inflation stays in check in the medium term, then there is no justification for the Reserve Bank to start hiking rates ahead of schedule. All this would do is take what little stimulus we currently have out of the economy, when it’s still trying to recover.

So what does this mean for homeowners and their mortgage rates?

In the short term, expect volatility — especially while uncertainty around the Strait of Hormuz continues.

That uncertainty is already pushing up longer-term wholesale rates, making cheaper three- to five-year fixed deals harder to find. If the conflict drags on, those rates are likely to keep rising.

Shorter-term rates — six months to one year — remain more closely tied to the current OCR at 2.25% and are likely to stay relatively stable for now, given the Reserve Bank’s stance today that it’s sticking to its strategy of looking at medium-term (there’s that word again) inflation.

Focus will now shift to the next Monetary Policy statement on 8 April.

If the Reserve Bank shifts its tone and sees evidence of inflation taking hold, then we could be looking at a situation where the OCR does go up earlier than expected. If that happens, we’ll also see a hike in those short-term rates.

What are your views on this? Are you already feeling the impact of inflation? What’s expensive for you right now? Let us know in the comments below.