Economists predict lower mortgage rates amid Trump-era trade volatility
As US President Donald Trump reignites global trade tensions, New Zealand mortgage holders may find a silver lining in the chaos.
Economic experts suggest the current uncertainty—spurred by tariff wars between the US and China and fears of wider trade fragmentation—could help drive down interest rates locally, offering relief to borrowers.
“With mortgage rates already falling and further drops expected, Kiwi households on short-term fixed rates may roll over to better deals in the coming months,” economists told OneRoof.
But alongside these gains are deeper concerns about what global economic instability could mean for New Zealand’s broader outlook.
“Our largest trading partners are going at it head-to-head, hammer and tong,” said Kiwibank chief economist Jarrod Kerr (pictured upper left), referring to the US-China trade dispute. “Amazon has already cancelled a whole bunch of orders... there’s no doubt a lot of American companies will be doing the same thing.”
The volatility is being fuelled by Trump’s erratic trade policy shifts, Kiwibank reported. Just days after imposing the steepest tariffs in over a century, the White House paused reciprocal tariffs for all but China—where imports now face 145% levies and US exports 125%. A weekend pivot then exempted key electronics, highlighting ongoing uncertainty.
Interest rate cuts likely, but at an economic cost
Falling demand from trading partners could hit jobs and growth.
While Kerr believes New Zealand’s direct trade with the US—such as beef exports—is relatively safe, he warned that the indirect impact of falling global demand will be hard to avoid.
The result could be a slower economy, lower inflation, and rising unemployment, even as the Reserve Bank is expected to continue cutting the OCR.
“They have the ability to print money and buy government bonds... and they have obviously got the ability to cut interest rates,” said Kerr. “I don’t think we’ve hit the floor yet.”
Westpac’s Kelly Eckhold (pictured upper right) echoed these concerns, noting that while households may welcome cheaper debt, the underlying reason is “the global trade war and that reduced demand for the things New Zealanders sell in international markets.”
“It could be the reason your mortgage rate is going down is because maybe some of these more negative things are happening in the economy,” he said.
Forecasts are uncertain in a volatile trade environment
With markets swinging on the whims of international policy shifts, economists agree that forecasting is becoming increasingly difficult.
“We’re essentially in an unforecastable, unpredictable environment,” said BNZ chief economist Mike Jones (pictured lower left).
“Big investment decisions tend to stall in this sort of environment... the most certain thing you can say is there is going to be some negative effects.”
BNZ still anticipates a sub-3% OCR, and if realised, mortgage rates would continue trending downward. But Jones warned that predictions must carry caveats given the volatility out of Washington, OneRoof reported.
New Zealand’s strength: Stability and safe haven status
Andrew Chambers (pictured lower right), CEO of Tella mortgages, said New Zealand’s reputation as a stable “Plan B” for global investors could offer protection amid external turbulence.
“We see a lot more migration inflows in bad times than in good and our dollar goes up... as investors move out of USD into NZD,” Chambers said.
While Chambers doesn’t expect debt servicing costs to rise or inflation to surge domestically, he cautioned against complacency.
A downturn among New Zealand’s top four trading partners—China, the US, Australia, and the EU—could strain rural and corporate sectors, holding back job creation and overall growth.
“We are export-led so we’ll need to watch this space,” Chambers said. “Overall, we may come out better off than many of the countries we compete against, such as Italy [or] Chile.”
Lower rates may boost housing, but economic risks remain
While falling interest rates could help revive New Zealand’s housing market and support consumer spending, economists caution that such benefits come with trade-offs.
The real danger lies in weaker global demand leading to sluggish job growth, reduced investment, and uncertain economic recovery.
As Mark Smith of ASB concluded: “The world economy is now looking a lot more tenuous... there’s a silver lining [in mortgage rates] but there’s also some costs to the economy from this volatility.”
For now, Kiwi borrowers may enjoy lower repayments—but the longer-term picture hinges on how deeply Trump’s trade disruptions ripple through global markets, OneRoof reported.
