Refinancing surges as borrowers chase better deals
New Reserve Bank data shows mortgage refinancing activity in June reached its highest level since records began in 2017, with more than 3,500 borrowers switching lenders and refinancing nearly $2.5 billion in loans.
This accounted for 30% of all new mortgage commitments in June – also a record share – as switching intensifies competition and reshapes New Zealand’s lending landscape.
The surge in switching reflects shorter loan terms, maturing fixed rates, and rising borrower awareness – trends that are expected to persist through the second half of 2025.
Fixed rollovers, cashbacks and short terms drive activity
According to Kelvin Davidson (pictured), chief property economist at Cotality NZ, refinancing volumes were boosted by a combination of favourable switching conditions and heightened borrower engagement.
“A record number of existing mortgage holders changed lenders in June, likely reflecting the short-term structure of many loans and the current ability to switch with minimal or no break fees,” Davidson said in a media release. “The cashbacks being offered are the incentive to take advantage of these conditions.”
The Reserve Bank confirmed that 3,553 mortgage holders switched lenders in June – a new high – and noted that around $200 million worth of mortgages are either on floating or due to be refixed within six months, further fuelling borrower movement.
Mortgage holders watching rates and terms closely
Davidson said refinancing trends point to an increasingly proactive borrower base.
“This rise in refinancing remains a continued focus for the banks and shows that mortgage holders are actively monitoring rates and terms as conditions shift,” he said. “With a high share of borrowers coming off fixed terms over the next six months or so, it’s possible this switching behaviour may remain elevated for a while yet.”
Lending activity rebounds across buyer groups
Overall mortgage lending rose to $8.3 billion in June, up $2.6 billion year-on-year. That figure includes lending for home purchases, equity withdrawals (top-ups), and refinancing.
Davidson said buyer mix remained consistent.
“Both investors and owner-occupiers remain part of the upswing, and more specifically so too do first-home buyers (FHBs) – that’s fully consistent with the Cotality Buyer Classification figures,” he said.
Still, with refinancing reaching record levels, the share of mortgage lending allocated to home purchases dropped to 55.7% in June – a new low – despite actual spending on house purchases rising 40% year-on-year to $4.6 billion.
Low-deposit lending still popular with FHBs
While loan-to-value ratio (LVR) limits aren’t currently being tested at the system level, low-deposit lending remains popular with first-home buyers.
“12.1% of lending in June was done with a deposit less than 20%... They [FHBs] still account for 75-80% of all low-deposit owner-occupier activity, and nearly half of all FHBs are entering with less than a 20% deposit.”
Interest-only and high DTI lending remain in check
Davidson noted that interest-only lending is well below pre-COVID peaks and does not appear to be driven by financial stress.
“Around 15% of owner-occupiers (by value) took out interest-only debt in June, and almost 35% of investors,” he said.
“Going back to 2017, those figures were closer to 30% and 50% respectively, so interest-only lending could be considered ‘under control’ at present.”
High debt-to-income lending is drifting upward but remains below regulatory speed limits.
“For investors, 10.2% of loans by value were done at a DTI greater than 7, the highest share since 13.5% in January 2023,” Davidson said.
Among first-home buyers, 7.5% of loans went out at a DTI above 6, the highest share since October 2023.”
Shorter terms, lower rates support switching
Nearly 14% of mortgages are now on floating rates, and a further 39% are fixed and due to roll off by the end of 2025 – providing strong conditions for continued refinancing.
“This elevated level of switching likely reflects a mix of factors, including the increasing role of mortgage advisors, rising consumer awareness of lending options, and the continued level of cashbacks being offered,” Davidson said.
“With nearly 14% of mortgages on floating rates and another 39% fixed and due to roll off by the end of 2025, a large number of borrowers are in a position to switch lenders without large break fees.”
Refix decisions could reshape repayments
Davidson also highlighted how lower market rates are changing borrower behaviour.
“The average fixed mortgage rate currently being paid is around 5.8%, while market rates are typically now below 5%,” he said. “As loans mature, borrowers will need to decide not only what term to refix on, but also what to do with their ‘cash windfall’ from lower repayments.”
Property market stabilising, but risks remain
Davidson expects national median values to rise 1–2% in the second half of 2025, following a 0.6% gain in the first half.
He cautioned, however, that subdued economic conditions and job insecurity could limit price growth.
“What is clear is that sales activity has broadly returned to more typical levels... and this is starting to weigh on listings with the volume of stock on the market edging lower, helped by the likelihood that some vendors are actively withdrawing their properties too,” the Cotality NZ economist said.
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