Mortgage rate cuts easing financial pressure on Kiwi home owners, more ahead on loans

Falling interest rates are helping ease the financial burden on Kiwi home owners. Photo / Getty Images

Lower interest rates appeared to help ease financial pressures on Kiwis in the first half of the year, according to new banking data.

The New Zealand Banking Association (NZBA’s) latest retail banking insights for the first six months of 2025 show a decline in mortgage arrears and hardships compared with the end of 2024.

First home buyers also continue to come back into the market as they take advantage of current conditions.

The number of banking customers granted hardship status fell 9.1% to 6717 in the first six months of the year, compared with the final six months of last year, NZBA data shows.

Home loan arrears remained steady, with 1.5% of loans behind on their loan repayments – a drop of 0.1%. About 40.3% were ahead on their loans, up from 39.4%.

NZBA chief executive Roger Beaumont said most customers continue to manage their money well despite the challenging economic conditions.

“The decline in retail interest rates is definitely helping reduce financial pressure for many people with home loans,” he said.

“That’s especially true for borrowers on floating rates, and will assist those on fixed rates as those loans come up for renewal.”

The Official Cash Rate (OCR) has fallen 300 basis points (bps) since August last year – dropping from 5.25% to 2.5% – leaving more money in Kiwis’ pockets.

NZBA’s figures show about 40% of home loan customers were paying more than their minimum repayments.

“[This] shows that many borrowers understand the benefits of repaying their home loan faster if they can,” said Beaumont.

Of the 60,249 new home loans opened in the six-month reporting period, 25% were issued to first time home buyers.

“It’s great to see first home buyers taking advantage of the current property market and getting into their first home,” said Beaumont.

“House prices are down in many areas, especially from the post-Covid peak. The cost of borrowing is also declining, so it makes sense first home buyers are active in the market.”

Nathan Miglani, managing adviser at Squirrel, said first home buyers have been dominating in the market but would soon be competing with property investors.

“For first home buyers, this is now the golden time for them to get serious and try to be in the market because people will be surprised how quickly the market will shift next year.

“Next year [first home buyers] will be competing with property investors.

“Last year the interest rate [fixed for one year] was 6.79%, nobody got excited about investment properties. But now the rate is 4.49%... and if it goes to sub-4%, a lot of property investors will definitely get very active in the market.”

Cameron Smith is an Auckland-based business reporter. He joined the Herald in 2015 and has covered business and sports. He reports on topics such as retail, small business, the workplace and macroeconomics.

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