Fixing for two years dominates as investors retreat from market

New Zealand borrowers are doubling down on two‑year fixed terms as rate nerves linger, even as the latest mortgages.co.nz–Tony Alexander Mortgage Advisers Survey points to a softer pullback from first-home buyers and a more decisive retreat by investors.

The May survey drew responses from 44 mortgage advisers across the country, providing an on-the-ground view of housing demand, bank appetite, and term preferences.

Advisers reported that “some slight easing of lending criteria is underway, focussed more on first-home buyers than others,” suggesting banks remain keen on new owner-occupier business.

First-home buyer nerves ease, but caution remains

The survey shows a marked shift in first-home buyer sentiment compared with April. Last month, a net 54% of advisers said they were seeing fewer first-home buyers seeking advice; in May that net figure improved to 16% reporting a decline.

Advisers indicate buyers are still wary, particularly around the outlook for borrowing costs, but the initial shock from geopolitical tensions and rising rate expectations has moderated. More listings, modest criteria easing, and ongoing support for low-deposit lending are helping committed first-home clients stay in the game.

On top of that, recent household data from a major bank points to borrowers reshaping budgets to cope with higher living costs, while many mortgage customers have built up repayment buffers by keeping instalments unchanged as rates fell over 2024–25. 

Separate investor polling also highlights first-home buyers as a key demand driver, with recent figures showing they account for more than a quarter of purchases nationwide and an even higher share in Auckland.

Investors step back as rate and policy risks bite

Investor demand tells a different story. A net 48% of advisers say they are seeing fewer investors seeking mortgage advice, broadly unchanged from April and back in line with conditions last seen in 2022.

The survey cites a mix of factors behind the investor pullback, including tighter debt-to-income settings, changing cashflow maths, and concerns about offshore developments. As Alexander (pictured) puts it, “funds are being made available by the banks, but some new caution may understandably have crept in as we all regard events offshore in particular with some trepidation.”

That wariness is echoed in separate landlord research showing more existing investors looking to sell than buy over the next year, even as most still plan moderate rent increases rather than aggressive hikes.

Against that backdrop of cautious but reasonably well‑buffered borrowers, term selection is now heavily skewed towards the mid-range.

Two-year fixes firmly in the driver’s seat

According to the survey, “Borrowers strongly prefer fixing two years over any other term.” With around 85% of advisers saying two-year rates are the most popular choice, there is minimal interest in one-year fixes or much longer terms.

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