Higher costs bite Kiwis but wealthier borrowers benefit
New data from Stats NZ show the average New Zealand household’s cost of living rose 2.2% in the year to December 2025 – a much gentler pace than the inflation shock of 2022, but with big differences between borrower groups that mortgage advisers will need to navigate.
The household living‑costs price indexes (HLPIs) rose 2.2% over the year, down from 2.4% in the 12 months to September. After peaking at 8.2% in late 2022, HLPI growth has “returned to levels last seen in June 2021, when it was 2.5%.”
By contrast, headline inflation as measured by the consumers price index (CPI) was 3.1% in the year to December, up slightly from 3.0% in September. The gap matters for borrowers because, unlike CPI, the HLPIs include interest payments.
Stats NZ prices and deflators spokesperson Nicola Growden said falling interest costs are a key reason the average household’s living‑cost inflation is now below CPI.
“Interest payments fell 17.3% for the average household over the past year, while the cost of building a new home increased 1.2% over the same period,” Growden said in a media release.
For many mortgage holders, that drop in interest payments has helped offset higher prices elsewhere – but not everyone is benefiting equally. Recent ANZ‑Roy Morgan figures show consumer confidence has climbed to its highest level since 2021, giving advisers a cautiously brighter backdrop even as many households remain wary of big‑ticket spending and mortgage holders report less enthusiasm than debt‑free Kiwis.
Superannuitants and low‑income households feel the most pain
Superannuitant households recorded the highest living‑cost inflation at 3.8%. Local authority rates rose 8.8% and “contributed nearly one-fifth of their overall inflation.” Electricity, up 12.1%, and health insurance, up 20.3%, were other key drivers.
“Superannuitants are more likely to own their own homes and not have a mortgage. Higher prices for local authority rates have more impact on superannuitants than on other household groups,” Growden said.
Among superannuitants, 85.7% own their home but only 8.5% have a mortgage, so they don’t share in the relief from lower interest.
Lower‑expenditure and beneficiary households are being squeezed by power bills and rent. Electricity’s 12.1% annual rise contributed nearly a quarter of the 3.7% inflation rate for lower‑expenditure households, and one‑fifth of the 3.1% rate for beneficiary households.
“Most households rely on electricity for their daily needs. Changes in electricity prices will impact households differently depending on how much of their expenditure goes towards their monthly power bill,” Growden said.
Rent, up 1.9% over the year, was the main contributor to rising living costs for beneficiary households, accounting for 18.4% of their annual inflation. Māori households saw similar pressure from rent within their 2.2% annual inflation rate.
Higher‑spending, higher‑debt households get most benefit from lower rates
At the other end of the spectrum, the highest‑spending households recorded the lowest living‑cost inflation at just 0.8%, largely due to an 18.6% drop in mortgage interest payments. Among this group, 82.3% own their home and 57.2% have a mortgage, meaning falling rates have delivered a disproportionate boost.
For NZ mortgage advisers, the figures underline an uneven reality: while average cost‑of‑living inflation is back near 2021 levels and sentiment is improving, superannuitants, renters, and lower‑income borrowers are still under significant pressure, even as more leveraged, higher‑spending clients enjoy some relief from cheaper debt.
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