Usually, lower rates would have borrowers rushing to the banks. In 2025, that isn't happening
After more than two decades in finance, Frank Cui, managing director at EverBright Finance, finds himself navigating what he calls a “strange market.” Unlike previous cycles, where high interest rates typically cooled demand and low rates triggered a lending surge, today's landscape defies the norm. Rates are low and lenders are eager – but buyers, from first-home hopefuls to seasoned developers, are still holding back.
“It’s an interesting time,” Cui told NZ Adviser. “The cash rate is low and the lenders are very keen to get their money out of the door, but people are still hesitant to make decisions.”
That hesitation is having ripple effects across the property finance ecosystem. Developers are facing rising pressure from unsold residential stock - projects that, under normal market conditions, would have turned over quickly. Instead, they’re lingering.
Cui said that the traditional 45-to-50 day window for selling, leasing, or refinancing completed developments has become increasingly rare over the last year, and this has pushed developers to have to make some difficult choices. While developers used to work on margins of between 20-25%, they’re now sitting at break-even – and sometimes, even a loss.
“This has resulted in cash flow issues for those developers,” he said. “In this scenario, you can either sell at a discount and move on, or you release as much equity as you can out of your previous project so that you can jump into the new one.
“The main reason is that end buyers have not really made enough moves for new builds,” he said.
“Post-COVID, valuations dropped anywhere between 15-28% depending on location. It’s a very tough decision for those clients to make – do they let the stock go without making profit, or do they hang onto it for longer and hold off restarting any new projects?”
Non-banks increasingly coming to the rescue
As developers look for ways to stay afloat, refinancing and equity release have become increasingly common - particularly through non-bank lenders.
While traditional lending channels have remained in the mix, stricter credit conditions and a risk-averse lending environment have made it harder for developers to convince them to offer funding. This is particularly true for those juggling delayed sales and cash flow shortfalls.
Non-bank lenders have been stepping forward to plug this gap over the last few years, and Cui said the proportion of deals sent to the specialist lenders has grown substantially over the last year.
“Developers are using the borrowed funds to buy more time, and we’ve done a lot of refinancing and equity release transactions as a result,” he said. “We’ve seen non-bank transactions increase by about 30% off the back of that.”
The slowdown in the consumer borrowing market is being felt just as much. While home loan interest rates have begun to soften in response to expectations of further OCR cuts, borrowers are still approaching the market with caution. Cui attributed this hesitancy to a disconnect between headline economic data and lived experience, most notably for first-home buyers.
This combination of factors is contributing to a ”wait and see” mindset, especially among those who rely solely on PAYE income.
“Consumer borrowers aren’t as active as before, and there is still speculation that interest rates might drop a little more,” Cui said.
“First-home buyers are also usually relying on income, and while inflation has dropped, the real feeling when you go to the supermarket for groceries is that it hasn’t dropped that low. If people are just about managing on their current income, they have to be very cautious about making big purchases and their affordability.
“Investors are not out of the door at all,” he said. “That’s why we’ve seen a lot of those commercial borrowers just trying to sort things out within this current cycle.”
