New Zealanders feeling a financial-crunch will still need to watch their spending as inflation starts to ease

A new Westpac report forecasts inflation to hover around two-percent this year, with further OCR cuts until May.

New Zealanders can expect a drop in mortgage rates, with higher property values and softer rent hikes to follow.

However, Senior Economist Satish Ranchhod says households on a tight budget should remain cautious and keep track of their finances, as the cost-of-living crisis isn't over yet.

He says there are still challenges ahead with rising unemployment and uncertainty for trade policies abroad.