Movement on mortgages: Kelvin Davidson
10 things to know about mortgage lending in New Zealand right now.
As interest rates ease and housing activity picks up, mortgage lending is following suit. The New Zealand Reserve Bank’s latest data shows how borrowers and lenders are adapting to these changing conditions. It reveals 10 key insights shaping the mortgage market – from the rise in refinancing to the growing appetite for short-term fixed rates.
Cotality NZ Chief Property Economist
1. New mortgage lending is gaining momentum
Activity across house purchases, loan top-ups, and refinancing has risen year-on-year in 24 of the past 26 months, reflecting stronger borrower confidence.
2. The system is growing
Outstanding home loans total $385 billion, up 5.6% in the past year – the fastest growth since August 2022. New lending and interest charges continue to outpace repayments, steadily lifting overall mortgage debt.
3. Short-term rates remain in favour
Nearly 30% of new loans this year are on floating rates, up from the usual 20%. Around half are fixed for six to 12 months, while only 28% are fixed long-term. Borrowers are clearly staying flexible to capture future rate cuts.
4. Looser LVRs could benefit investors the most
Just 13% of owner-occupier loans and 0.5% of investor loans were written at high loan-to-value ratios (LVR) in September. Easing LVR limits from 1 December should help both investors and first-home buyers secure approvals.
5. First-home buyers lead low-deposit lending
A record 51% of first-home buyers borrowed with less than a 20% deposit, making up nearly 80% of all low-deposit owner-occupier loans. Eased rules should further support this group.
6. Interest-only lending remains contained
Interest-only loans make up 16% of owner-occupier and 36% of investor lending – well below past peaks – suggesting no widespread repayment stress.
7. DTIs could shape lending policy in 2026
In September, 8% of first home buyers took out loans with a debt-to-income (DTI) ratio above six, while 11% of investor loans exceeded a DTI of seven. High debt-to-income loans remain under Reserve Bank caps but are edging up. DTIs are likely to become a stronger policy focus as serviceability test rates ease.
8. Many borrowers will benefit from lower rates
With 12% of loans floating and another 33% due to reprice by March, many households are set to enjoy lower repayments and improved budgets.
9. Refinancing remains a key driver of activity
Borrowers continue switching banks at near-record levels, encouraged by cashback deals and short-term flexibility.
10. Repayment stress appears to have peaked
Non-performing loans have eased to 0.6%, well below global financial crisis levels, with banks trimming bad debt provisions – a sign the stress cycle is past its peak. With rates easing and policy settings supportive, lending momentum looks set to strengthen into 2026.
