RBNZ data shows mortgage arrears fall as rate relief takes hold

The amount of non-performing housing loans dropped by $88 million in August, following a $55 million fall in July, Reserve Bank of New Zealand (RBNZ) figures show.

This suggests lower mortgage rates are starting to ease borrower stress, after arrears peaked at $2.457 billion in June. By August, the total had fallen to $2.314 billion — the lowest since December 2024.

RBNZ data shows $1.751 billion worth of mortgages were 90 days past due but not impaired, down $104 million in a month. However, impaired loans edged up $15 million to $563 million.

While it is “dangerous to draw conclusions too quickly,” interest.co.nz noted this is the strongest two-month improvement since 2020, and may indicate the worst of the mortgage distress cycle is now over.

Rate cuts delivering relief

Mortgage arrears rose sharply after interest rates began climbing in 2021, peaking with one-year fixed rates above 7.3% in late 2023. But the average one-year rate has since fallen to 4.74%, with some banks offering as low as 4.49%.

Crucially, the average yield across existing mortgages — which lags new advertised rates — has now dropped from 6.39% in October 2024 to 5.55% in July 2025. This easing is feeding directly into lower arrears.

Lending rebounds with investors active

At the same time, RBNZ’s August sector data shows housing lending stock rose by $2 billion (0.5%) to $377.5 billion. Annual growth lifted to 5.6%.

Owner-occupier lending grew by $1.3 billion (0.5%), while investor lending surged $680 million (0.7%) — the strongest investor growth in four years.

Investor mortgage stock has now climbed $6.1 billion (6.7%) year-on-year to $97.9 billion.

Market backdrop still cautious

Despite signs of relief, housing sentiment remains cautious. Realestate.co.nz reported the national average asking price fell 2.4% in September to $851,259, the lowest since February, with only a modest spring lift in new listings. First-home buyers remain the most active group, while investors are selectively re-entering, but confidence ahead of the October OCR decision is still fragile.

More good news for the credit environment: recent RNZ analysis shows that a large share of Kiwi borrowers are paying ahead of schedule. At Westpac, about 65% of customers are at least three months ahead, with buffers averaging $12,000. ANZ reports over 40% of its customers are six+ months ahead, and nearly half have savings buffers of $5,000 or more.

Outlook for mortgage advisers

For advisers, the RBNZ’s August figures offer a more positive backdrop:

• Mortgage distress is easing as falling rates flow through to households.

• First signs of renewed demand are showing in both owner-occupier and investor markets.

• With investor mortgage growth at its strongest since the pandemic boom, brokers should prepare for a busier pipeline in 2026 as rates continue to decline.

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