Structural shift emerges in home lending
New Zealand mortgage holders are increasingly opting for longer fixed terms as falling interest rates influence borrowing strategies. The Reserve Bank of New Zealand’s (RBNZ) latest data for April show a marked shift from shorter-term to longer-term mortgage contracts, reversing the dominant pattern of the previous year.
In January, $211 billion worth of mortgages – 56.9% of the total $371 billion mortgage book – were either on floating rates or fixed for six months or less. A report from interest.co.nz noted that percentage has now declined to 53.3% of a $375.5 billion loan total, indicating that borrowers are shifting away from short-term commitments. As of April, just over $200 billion worth of mortgages fell into this short-term category.
Rate cuts drive changes
The change corresponds with adjustments to the Official Cash Rate (OCR). Since August last year, the OCR has been cut from 5.5% to 3.25%, with the RBNZ suggesting a further reduction to 2.75% by early next year. Some economists believe it could drop as low as 2.5%. The extent of OCR reductions is expected to determine future shifts in mortgage rates.
A separate data series from the RBNZ that tracks new mortgage sign-ups shows a clear trend toward two-year terms, which had fallen out of favour in the past year. This shift is also visible in the broader mortgage market. In April, $61.5 billion worth of mortgages were fixed for between one and two years—an increase of $13.5 billion or 28% from January. That segment now represents 16.5% of the mortgage book, up from 13% in January.
Longer terms of over two years remain a minority, with just $13 billion, or 3.5% of the mortgage total, extending beyond that duration.
Investors return to the market cautiously
Investor involvement in the mortgage market is also showing a modest resurgence. According to the RBNZ’s loans by purpose figures, the outstanding investor mortgage balance rose by $572 million (0.6%) in April to $95.433 billion. This marks an annual increase of 5.1% compared with a 4.7% rise in owner-occupier loans, which reached $274.798 billion.
Investor borrowing has grown more rapidly in 2025. Nearly $2 billion has been added to investor mortgage stock in the year’s first four months, at an annualised rate of 6.3%. The past two months show growth exceeding 7% on an annualised basis.
While the overall level of investor activity remains below pre-pandemic highs, the trend suggests a return of investor confidence as the mortgage landscape undergoes a structural shift.
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