Lending surge marks strong Q1 performance
New Reserve Bank figures revealed that New Zealand’s mortgage market is off to its strongest first quarter in four years.
According to interest.co.nz’s David Hargreaves, the March 2025 quarter saw a surge in both lending volumes and the number of new mortgages.
“The data shows that whether you look at the amount of mortgage money advanced, or the number of mortgages, first-quarter 2025 has been the busiest start to the year for the mortgage market since the super-hot first quarter of 2021,” Hargreaves said.
Top-up loans declining but still significant
Among the 52,323 total mortgages recorded in Q1 2025, top-ups made up 45%—down from 58.6% in early 2018. The average size of top-ups has ranged from $62,000 in 2017 to $115,000 in 2022, showing a long-term upward trend.
“Breaking down the figures into the various categories highlights the extent to which the ‘top ups’ category tends to skew the overall figures,” Hargreaves said.
House purchase lending reveals market resilience
Despite recent slowdowns, house purchase lending in early 2025 nearly matches pre-COVID levels. The average mortgage for a house purchase reached $582,000 in Q1 2025, compared to $369,000 in 2017.
“Nobody doubts business has been quiet, but if we look at the figures for mortgages deployed for actually buying a house, then it’s not quite as quiet as might have seemed,” Hargreaves said.
Rising debt reflects housing price growth
Median house prices have risen by $244,000 since 2017, while average mortgage sizes have increased by $214,000 over the same period—suggesting homeowners are funding price growth largely through borrowing.
“Our house price rises are paid for largely by us taking on more debt, not by us magically finding more savings,” Hargreaves said.
Switching activity picks up amid large mortgages
With mortgage sizes growing and interest rates still high, borrowers are increasingly shopping around for better deals. A typical $679,000 mortgage at 4.99% results in annual repayments exceeding $43,500.
“People are prepared to ‘shop around’—and when we look at the size of the mortgages being switched, it’s hardly surprising,” Hargreaves said.
March saw a record 3,122 loans switched to new providers—the highest monthly total ever recorded. Borrowers are also locking in short-fixed terms, with nearly 60% of owner-occupiers choosing one- or two-year fixed rates in March, reflecting strategic shifts amid expectations of falling interest rates.
Large volume of mortgages set for reset
As of March, 52.9% of outstanding mortgage stock was either on floating rates or fixed for six months or less—equivalent to nearly $200 billion due for reset by September.
“So, one way or another—whatever happens to house prices—it’s shaping up to be a busy year for the mortgage business,” Hargreaves said. “A lot of people have a decision to make.”
