Mortgage holders hardest hit as fuel and borrowing costs squeeze household budgets
New Zealand consumer confidence has fallen sharply to its lowest level in three years, with rising fuel costs, rising mortgage rates, and growing economic uncertainty driving a broad deterioration in household sentiment across the country.
The Westpac-McDermott Miller Consumer Confidence Index dropped 14.3 points in the June quarter to 80.4 — down from 94.7 in March. A reading below 100 indicates pessimists outnumber optimists. The 10-year average of 98.3 puts the current reading well below historical norms.
According to the report, the cause is clear: "In the wake of the Middle East conflict, fuel and other living costs have been pushing higher. There has also been related upwards pressure on borrowing costs and growing concerns about the outlook for economic activity. All of that has been a drag on household spending in recent months."
Both present and future conditions deteriorated sharply. The present conditions index fell 14.4 points to 73.5, while the expected conditions index dropped 14.2 points to 85. A net 32% of households now expect economic conditions will weaken over the coming year — the most pessimistic result in three years. The survey was conducted across 1,550 consumers between 1 and 12 June.
Mortgage holders among the hardest hit
The report identifies a particularly significant pattern for mortgage advisers: the largest confidence falls have been concentrated among households earning between $70,000 and $100,000 per annum. The report notes that "many households in this income bracket will have mortgages, and the rise in borrowing costs in recent months will be adding to the concerns about pressures on their finances." Confidence has fallen across all age groups, with a more pronounced drop among those aged under 50.
RBNZ B20 data confirms the squeeze is real — fixed mortgage rates rose across all terms in May, with the one-year rate at 5.26% and the five-year at 6.24%, and the RBNZ signalling two further OCR hikes before year end.
That pressure on household finances is translating directly into changed behaviour at the checkout.
Spending appetites at weakest since 1991
A net 38% of households reported cutting back on dining out and entertainment — the weakest result since 1991. Households are also more cautious about major home purchases, though spending on furnishings has held up as international travel has fallen away.
Westpac's May 2026 Retail Spending Pulse confirms the shift — per-person card spending fell 0.3% in May and has tracked sideways since January.
Wellington weakest; Canterbury a relative bright spot
The regional picture shows uniform weakness with some variation. Wellington recorded the lowest confidence of any region at 74.2 — weighed down by public sector job losses, a soft labour market, and weak business trading conditions. Otago also fell sharply, with the outlook for international tourism and hospitality darkening and Queenstown operators reporting a drop in bookings.
Canterbury held up relatively better at 83.2, with the continued strength of the dairy sector providing some insulation. However, the report notes that "even here confidence has taken a sizeable knock."
A ceasefire may offer some relief
The survey captures sentiment before a potentially significant development. Since fieldwork closed, US President Donald Trump announced a ceasefire extension with Iran and the reopening of the Strait of Hormuz.
The report acknowledges the timing: "oil prices have already started to drop back and, if this continues, it could pave the way for a recovery in confidence and firming in economic activity through the back part of the year."
For brokers, the practical focus is clear: clients in the $70,000–$100,000 income bracket are under the most acute pressure, and serviceability conversations should account for both the current rate environment and the likelihood of further OCR increases before year end.
Access the full Westpac report here.
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