The squeeze is set to ease

Borrowers will save on average between $300 and $460 a month on their mortgage repayments when the OCR drops to 3.25% by the middle of the year.

Westpac’s latest update on household finances shows borrowers are nearing the end of the re-fixing cycle when they were rolling on to higher rates.

Over the next six months close to half of all fixed-rate mortgages will come up for repricing.

For those borrowers who fixed up to two years ago, they could see their interest rate dropping by more than 100 basis points when they next refix (depending on when they took out their mortgage and how long they fixed for).

Westpac senior economist Satish Ranchhod says those lower interest costs will have a dramatic impact on households’ disposable incomes.

For instance, a borrower owning an average-priced house with 50% remaining on their mortgage who had fixed for one year at the start of last year and was refixing again now for one year, the minimum payment in most parts of the country will fall by about $300 a month.

“For those who own their home outright or have a mortgage free investment property, the falls in interest rates we’re now seeing will likely lift the value of their assets over the coming year.”

If the borrower lived in Auckland where house prices tend to be higher, the fall in debt servicing will be $462 a month.

Only about one-third of New Zealand households live in their own home and also have a mortgage. About one third rent and the remainder are mortgage free.

However, even households without mortgages are likely to be affected by the easing in financial conditions now in train, Ranchhod says.

“For those who own their home outright or have a mortgage free investment property, the falls in interest rates we’re now seeing will likely lift the value of their assets over the coming year.”

The bank is forecasting house prices will rise by about 8% this year and 5% next year.

Those gains are likely to boost confidence and spending appetites, he says.  

Those households who rent are not directly exposed to falls in interest rates, but, there’s a good chance their house or flat still has a mortgage associated with it.

Increases in interest costs have been an important contributor to the rise in rents over the past few years.

Rents are continuing to rise, with landlords reporting ongoing increases in operating costs, like insurance and rates, but the market is starting to see some of the pressure on rents ease, Ranchhod says. 

That’s in part due to the fall in mortgage servicing costs, as well as factors such as slowing population growth.

“The loosening in financing conditions is also important for those who rent, as the related improvement in debt serviceability could also make it easier for them to buy a home,” he says.

Under 35s feel locked out of housing market

Meanwhile the Ipsos Housing Monitor 2025 shows 77% of New Zealanders think that young people will have a hard time affording their own home, even if they’re working hard in a good job.

They see the housing situation worsening over generations. 74% think it is harder for people their age to buy/rent a home compared to their parents' generation. That is higher than the global average of 67%. Additionally, 81% of under 35s in New Zealand hold this view.

The majority say housing is on the wrong track and the government has role to play. 54% of New Zealanders think the country is on the wrong track when it comes to housing and 60% disagree that there isn't much the government can do about housing problems.

High property prices seen as top housing challenge, followed by cost of renting. 51% cite high property prices as the biggest housing challenge, while 49% point to high costs of renting. Renters are much more likely than owners to see cost of renting as the top issue (70% vs 37%).

The suburban detached home remains the ideal for many. 41% of New Zealanders say a detached home in the suburbs is their preferred living situation, followed by a rural home (23%). Inner-city apartments (12%) and detached homes (12%) are less popular options.