Equifax data shows steady credit demand and improving repayment health despite OCR hike
New Zealand's mortgage market is holding up well even as households tighten their belts under sustained cost-of-living pressure, according to Equifax's latest NZ Market Pulse.
Nick Foster (pictured), head of solutions at Equifax New Zealand, said secured lending has proven more durable than other parts of the credit market.
"In secured lending, mortgage performance remains remarkably resilient on the surface,” foster said. “Home loan arrears softened again in June to 0.5%, and overall mortgage hardship levels sit more than 16% below where they were this time last year. While home loan enquiries are still up 10.5% year-to-date, the pace of borrower switching is becoming more measured as consumers move toward locking in longer fixed rates amid ongoing interest rate uncertainty."
A widening two-speed property market
That mortgage resilience plays out unevenly across the country. Foster pointed to a growing regional divergence in property values, with the South Island continuing to outperform major urban centres.
"We continue to track a distinct two-speed property market across New Zealand,” he said.
“South Island regions like Southland, West Coast, and Otago are delivering annual gains, whereas major metropolitan urban centers continue to slide. Auckland remains the weakest metro market at negative 2.5% YoY, driven by weaker employment sentiment, higher borrowing costs, and elevated property supply."
Households turn selective as inflation bites
Against that backdrop, household spending is coming under renewed pressure. Annual inflation climbed to 4.1% in the June quarter, its highest level in two years, as the Reserve Bank lifted the official cash rate to 2.5%. Foster said the combination is reshaping how Kiwis spend.
"The July Equifax Market Pulse highlights a tightening financial climate for New Zealand households as persistent cost pressures take their toll,” he said. “With annual inflation climbing back to 4.1% - pushed up by petrol, electricity, and rates — and the RBNZ lifting the cash rate to 2.5%, we saw retail card spending fall 1.4% in June. Kiwis are taking a much more selective approach to their spending, prioritising core essentials over discretionary buys."
Unsecured borrowers under mounting strain
That selectivity hasn't been enough to shield unsecured borrowers from mounting stress.
Foster flagged personal loan hardship as one of the most pressing concerns in the July data.
"One of the most critical areas of concern in our July data is the persistence of hardship in unsecured debt,” he said. “Personal loan hardship applications jumped 5.1% over the month and are now more than 30% higher than a year ago. Furthermore, personal loan arrears for non-major lenders remain elevated at 5.5% compared to just 1.9% for the major banks. This widening gap shows that while homeowners are managing to hold the line, non-asset-backed and vulnerable borrowers are feeling the acute strain of sustained living costs.”
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