Caution slows NZ mortgage activity as buyers retreat
The latest mortgages.co.nz & Tony Alexander Mortgage Advisers Survey for May revealed a continued cooling in mortgage activity, particularly among first-home buyers, as rising caution and bank processing delays weigh on the market.
“Brokers are very frustrated with slow application processing by banks,” Alexander (pictured above) said, adding that demand has dipped amid “uncertainty about the international environment.”
Only a net 4% of mortgage advisers reported an increase in first-home buyer inquiries—down from 21% last month and far below the November peak of 55%. This marks the lowest reading since July last year, when the figure dipped into negative territory.
This slowdown in demand comes as the broader New Zealand housing market shows signs of stabilisation, with QV data pointing to modest price gains in Auckland and Wellington and improving conditions for first-home buyers.
Banks tighten criteria, but First Home Loans remain available
While banks continue to lend to first-home buyers, advisers say stricter credit assessments are affecting application speeds—particularly through the broker channel.
“Banks are wanting live deals only as they are stretched on capacity to assess deals,” Alexander said. “Strict criteria on assessment is slowing down turnaround via adviser channel. Bank direct access appears faster.
“First Home Loans still readily available, however.”
Several brokers reported low equity deals were more difficult to secure unless applicants already had accounts with major banks.
Investor activity remains muted but lending eases slightly
Investor activity was subdued again in May, with only a net 5% of mortgage advisers seeing increased interest—unchanged from April and down sharply from earlier in the year.
“Investors are very quiet in the market. I have clients seeing value in townhouses in ChCh which are well priced due to low demand,” one adviser said.
Nonetheless, some positive signs are emerging.
“The banks are now way more willing to lend to investors, including for one bank to increase interest-only term back up to the full 10 years again,” another adviser said.
This reflects a gradual loosening of criteria—a trend observed for the third consecutive month, although most of the major easing moves have already occurred.
One-year fixes regain popularity amid rate uncertainty
Mortgage advisers also observed a clear shift in borrower behaviour. Short-term fixed rates are back in favour, with 46% of brokers saying borrowers now prefer one-year fixed terms—up from 13% in April.
“Borrowers are continuing to show a strong preference for fixing only short periods of time,” Alexander said.
This cautious approach reflects widespread uncertainty about long-term interest rate trends and the economy.
Refinancing activity still strong despite recent dip
The net proportion of brokers reporting refinancing inquiries dropped slightly in May but remains high at 21%, signalling continued churn in the market.
“This sort of business will form a large part of broker and bank processing activity, and this may help explain the long bank processing times for fresh mortgage applications,” Alexander said.
The trend aligns with ongoing bank efforts to retain existing borrowers through competitive refinancing deals, as highlighted in recent market updates from major lenders.
