10 key mortgage trends shaping New Zealand’s property market

Fresh insights from Cotality highlights the key trends defining New Zealand’s mortgage landscape — from renewed first-home-buyer demand and easing loan-to-value ratios to early signs of a housing recovery.

The back-to-back rise in property values comes at a time when falling mortgage rates and stabilising sentiment are starting to lift confidence across the market.

New mortgage lending is gaining momentum

Activity across house purchases, loan top-ups and bank switching has increased year-on-year in 24 of the past 26 months, reflecting growing borrower confidence and engagement.

With the Reserve Bank expected to cut the OCR by 25 basis points later this month, momentum is likely to accelerate into 2026.

System growth hits fastest pace since 2022

The total value of outstanding home loans — or system growth — rose to $385 billion, up 5.6% year-on-year, marking the fastest annual rise since August 2022.

The trend reflects a period where new lending and interest charges have outpaced repayments, steadily lifting total mortgage balances.

Short-term rates dominate as borrowers stay flexible

Nearly 30% of new loans this year have been on floating rates, up from the long-term average of 20%.

Fixing for six to 12 months has become the preferred option for many, accounting for around half of new lending.

By contrast, longer-term fixed loans have fallen to 28%, down from 50% a year earlier, showing borrowers are keeping options open amid falling rates.

Looser LVRs could lift investor and first-home buyer activity

In September, just 13% of owner-occupier loans were written with less than a 20% deposit — below both the Reserve Bank’s 20% cap and many banks’ own tighter limits. For investors, that figure dropped to just 0.5%, highlighting how restricted high-LVR lending remains.

The easing of LVR restrictions from Dec. 1 is expected to “benefit both first-home buyers and investors.” Banks often move ahead of formal rule changes, suggesting the impact may be felt even before December.

First-home buyers dominate low-deposit lending

A record 51% of first-home buyers secured a mortgage with less than a 20% deposit — making up around 75–80% of all low-deposit lending to owner-occupiers.

With rates falling and lending rules easing, this group remains the key driver of market activity heading into summer.

Interest-only lending remains contained

In September, 16% of new owner-occupier loans and 36% of investor loans were interest-only.

Although higher than a year ago, these levels remain well below previous peaks, suggesting borrowers are managing repayment pressures carefully rather than relying on temporary relief.

Debt-to-income ratios could shape lending in 2026

About 8% of first-home buyer loans carried a DTI above six, while 11% of investor loans exceeded seven — both comfortably below the RBNZ’s 20% cap.

Cotality said DTIs will likely play a greater role in credit decisions next year as test rates ease and lending activity rises.

Borrowers set to benefit from repricing

Roughly 12% of existing home loans are on floating rates, while another 33% are due to reprice by March 2026.

Many borrowers will see repayments fall as they roll onto lower fixed terms, easing household budgets and improving affordability.

Refinancing remains a key driver of activity

Borrowers continue to switch lenders at near-record levels, drawn by cashback offers and competitive short-term rates.

With more loans floating or nearing expiry, refinancing opportunities are expected to remain elevated through early 2026.

Repayment stress has likely peaked

The share of non-performing loans — those more than 90 days overdue — has edged down to 0.6%, from a peak of 0.7% earlier this year.

Banks have begun trimming bad debt provisions, signalling confidence that the worst of the repayment stress cycle has passed.

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