It comes in the latest monthly report from the credit reporting company, Centrix.
It attributes the change to higher interest rates, to the Credit Contracts and Consumer Finance Act (CCCFA), as well as tighter Loan to Value Ratio (LVR) credit.
The figures show that for February, the value of new residential mortgage loans fell 21% on the same month a year earlier.
That amounted to nearly $1 billion in reduced lending.
Centrix added the data showed those with the highest credit scores were impacted most, as happened in January.
Despite rising interest rates, mortgage arrears remained low, thanks to the large number of fixed mortgages.
But pressure on borrowers would grow as fixed terms expired and were replaced at higher rates.
Centrix says the proportion of mortgage applications that were approved is just 34%.
As with the previous month, the worst impact was on those with a credit score of 700 or above, while those on 500 or lower were already being blocked for economic reasons and so were not affected by the recent changes to the law.
Commentators have suggested this fact shows that pre-existing controls were already working to stop borrowers from taking on unpayable debts, and the new rules penalised the wrong people.
Centrix adds that arrears on mortgages are low, at 1%, and that is down from 1.2% a year ago and 1.5% a year before that.
In contrast with home loans, business loan defaults were up 4%, with the retail sector especially hard hit.
