Quiet mortgage market persists as banks compete for business

The August mortgages.co.nz & Tony Alexander Mortgage Advisers Survey shows New Zealand’s mortgage market remains subdued, with slow bank processing times and signs that some lenders may be favouring direct clients over broker-originated customers. 

While both first-home buyers and investors are still in the market, interest levels remain modest. Competition among banks continues, with cashback incentives and minor policy adjustments aimed at attracting borrowers. 

The findings come as New Zealand’s housing market shows early signs of a spring revival, with tighter stock levels, stronger buyer demand, and economists widely expecting the Reserve Bank to deliver a 25bps OCR cut in August. Market watchers say falling borrowing costs, stabilising mortgage rates, and improving sentiment could further support buyer confidence and activity. 

First-home buyer activity levels off 

The surge in first-home buyer (FHB) activity seen in late 2024 has plateaued since the June quarter. However, a net 8% of brokers report seeing more young buyers in the market compared to last month. 

Mortgage adviser feedback on bank lending to FHBs includes: 

• “Status quo, with very minor tweaks to policy settings, and just longer wait times.” 
• “Lack of preapprovals above 80% are still restricting FHB confidence to put in offers on properties. Bank turnaround times are the other restricting factor.” 
• “Requirements for servicing surplus recently reduced by some banks.” 
• “Not much change in the banks’ policies. Some lenders are being able to use two boarders for clients with less than 20% deposit, this gives a slightly higher approval amount. The amount of loan being approved by the banks is not much of the issue, the issue is buyers have too much choice at the moment and that is making them take a longer time in finalising their decisions.” 

Investor interest remains patchy 

Investor demand is limited, with just a net 6% of brokers reporting more enquiries this month. Previous bursts of investor activity since early 2023 have been short-lived, and a sustained upturn has yet to emerge. 

However, some mortgage advisers note that banks are showing more willingness to lend to investors. Comments include: 

• “Harder on expenses shown by the clients. More drilling on expenses is done now.” 
• “Some banks are introducing a 10-year interest only period and those that aren’t are losing business with investors financing elsewhere.” 
• “Competitive in the cash contribution market.” 
• “They are a little more willing to take gross rental income rather than trolling through financial accounts if equity is good on their portfolio or at least the properties offered as security.” 
• “Investors can purchase brand new property with less than 20% deposit and some of the brand-new properties have come down a lot in their asking prices, making it attractive to purchase for investment. The yield on them is getting better especially the two-bedroom ones. From the banks’ point of view, it is good as they can lend to investors. Getting more approval done for the investors now as opposed to 6 months ago.” 

Lender willingness to advance funds rises 

There has been a noticeable lift in the net proportion of mortgage advisers saying lenders are more willing to advance funds – 24% this month, up from 13% in May, June, and July. 

“The period of extreme unwillingness or inability of banks to lend finished in the middle of 2022,” Alexander said. “The next change after that was a lift in credit availability early in 2023. That is the time when first home buyers came to dominate the market.” 

Borrowers opt for short-term fixes 

With minimal concern about rising interest rates and expectations of further monetary policy easing, most borrowers are fixing their mortgages for short periods: 

• 42% prefer a one-year term 
• 21% prefer 18 months 
• 23% prefer two years 
• 15% prefer three years 

While many borrowers are splitting loans across multiple terms, the preference remains firmly in the short-term range. Interest in three-year fixes has risen slightly, while demand for two-year terms remains mild. 

Refinancing enquiries increase 

A net 33% of mortgage advisers report more refinancing enquiries. This may be due to the large number of fixed-rate loans maturing before year-end, along with borrower interest in cashback offers for switching lenders. 

Read the full mortgage.co.nz & Tony Alexander Mortgage Advisers Survey for more details. 

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