Festive lift in confidence offers openings for advisers
New Zealand households are ending 2025 on a more upbeat note – and that’s good news for mortgage advisers working with rate‑sensitive borrowers.
According to the latest Westpac McDermott Miller Consumer Confidence survey, the index rose 5.6 points in the December quarter to 96.5, the highest level this year, though still a little below long‑run averages and under the 100 mark, meaning more pessimists than optimists.
Westpac senior economist Satish Ranchhod (pictured) said the survey shows “the proportion of people who expect economic conditions will improve over the coming year is the highest it’s been since 2021,” and that optimism is now starting to flow into spending and housing decisions.
RBNZ governor Anna Breman has signalled the OCR is likely to stay at 2.25% for some time if the economy evolves as expected, with recovering growth, easing inflation, and lower fixed mortgage rates creating a steadier backdrop for more proactive mortgage conversations into 2026.
Lower fixed mortgage rates finally reaching borrowers
The key driver behind the confidence lift is the cost of debt. As the survey puts it, “There’s something in the air, and it’s lower interest rates.”
While interest rates have been falling for over a year, many borrowers were still locked into higher fixed deals. That is now changing.
“Large numbers of borrowers have already rolled on to lower fixed mortgage rates, and that process will continue as we move into the new year,” Ranchhod said.
Importantly, even with some recent upward pressure, “most borrowers who are refixing now will still be rolling onto lower rates.”
One‑year fixed mortgage rates are around 130bps lower than this time last year, while two‑year fixed rates are about 220bps lower than in 2023. Those falls are expected to support a lift in disposable incomes heading into 2026.
Household finances: cautious optimism after a tough year
The survey describes households as “cautiously optimistic.” Many still say their financial position has deteriorated over the past year, with the ongoing cost‑of‑living squeeze and softness in the labour market key concerns.
However, households are “feeling a bit more upbeat about how their finances will fare over the coming year.” That increased optimism reflects growing confidence about the economy’s trajectory, with lower interest rates “helping to boost sentiment among households across the country.”
The lift in confidence has been strongest among higher‑income households, who are more likely to be homeowners and are already feeling the benefit of lower mortgage rates. Confidence is also up across all age groups, offering scope for first‑home buyers, upgraders and investors alike.
Rising spending appetites and housing‑linked purchases
With interest rates down and confidence about the economic outlook up, spending appetites have also been on the rise.
Recent months have seen more households saying it is a good time to make a major purchase, and more reporting higher spending on entertainment.
November retail figures showed strong increases in discretionary categories “like furnishings, apparel and dining out,” pointing to a shift from pure belt‑tightening to selective treating.
Regional confidence: Auckland out in front, Wellington lags
Ranchhod said, “Confidence has taken a step higher in most regions since our last survey,” underlining that large interest rate cuts over the past year are boosting disposable incomes nationwide.
Spending remains strongest in the lower South Island, but “we’re now seeing spending appetites firming right across the country. That includes Auckland, which is now the most upbeat part of the country.” That points to more active housing and refinancing discussions in the country’s biggest market.
Some regions, such as Waikato and Southland, saw confidence slip, likely tied to recent easing in dairy prices, though “economic conditions in rural regions generally remain firm.”
Wellington stands out for “low confidence,” with many households highlighting “softness in economic activity and the jobs market.”
See the full Westpac McDermott Miller Consumer Confidence report here.
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
