Borrowers ride rate cuts as credit demand rebounds
New Centrix data shows New Zealand’s mortgage market gaining momentum, with refinancing and new lending lifting as borrowers respond to rate cuts, and the wider credit landscape showing early renewal as businesses shift from risk containment to growth.
New household lending rose 13.2% year-on-year, while approved new mortgage lending increased 13.8% over the October quarter. Mortgage refinancing now makes up more than 30% of new mortgage lending, up from 22% three years ago, as borrowers chase sharper pricing across the market.
“As we close out 2025, the latest Centrix Credit Indicator highlights some encouraging signs of resilience and recovery across New Zealand’s credit landscape,” said Centrix chief operating officer Monika Lacey (pictured). “Recent reductions in the official cash rate (OCR) have begun to positively reshape the credit environment and last week’s cut is expected to reinforce this trend.”
Despite the rebound, overall mortgage volumes remain 9.1% below the 2021 market peak.
Mortgage arrears fall to lowest level since 2023
Mortgage performance continues to improve. Mortgage arrears dropped to 1.35% in October, down from 1.37% a month earlier and 5% lower year-on-year, marking the lowest level since November 2023.
Centrix reports 20,900 mortgage accounts past due, but says the overall arrears trend is moving in the right direction as households adjust to higher rates and benefit from easing OCR settings.
Across all products, consumer arrears fell to 11.83% of the credit-active population – the lowest level in more than two years – with 459,000 people behind on payments, down from 465,000 last month. Among those in arrears, 177,000 consumers are 30+ days past due, including 84,000 at 90+ days.
Credit demand shifts as borrowers adjust
Consumer credit demand is rising ahead of the peak retail season, up 4.8% year-on-year, supported by personal loans and increased mortgage activity.
In contrast, demand for credit cards and retail energy credit has softened, down 22.2% and 11.7% respectively. Credit card arrears edged slightly higher to 3.9% after last month’s low, but remain 11% below levels a year ago, indicating ongoing stability in revolving credit.
Vehicle loan arrears are holding at 5.1%, well under their March 2024 peak of 6.5%, suggesting sustained improvement in auto finance repayment trends.
Consumer credit overall also expanded, with lending across credit cards, vehicle and personal loans, buy now pay later (BNPL) and overdrafts rising 7% year-on-year.
Business credit demand climbs amid elevated liquidations
Business credit demand rose 3% year-on-year, signalling steady growth across key sectors. Hospitality led the surge with a 38% increase year-on-year, followed by education and training up 22% and retail trade up 19%.
Credit quality also shows tentative improvement. The average credit score for new business applications edged up to 749 in the latest data, compared to 747 last month, although it remains slightly lower than a year ago.
Company liquidations, however, remain elevated. October recorded the highest monthly total since 2011, reflecting ongoing financial stress in parts of the economy and increased IRD auditing and enforcement.
Construction remains the most affected industry, with 753 firms liquidated over the past year, up 21% on the previous year, although this still represents only 0.9% of all registered companies in the sector. Hospitality is the second most impacted, with 318 liquidations in the past year, up 45% year-on-year.
Encouragingly, signs of improvement are emerging across six of the 19 industry sectors, notably wholesale trade, financial and insurance services, and information media and telecommunications, Centrix reported.
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