Higher-leverage lending grows even as rates rise and prices slip
A growing share of New Zealand’s new home loans is going to more highly leveraged borrowers, even as overall mortgage funding shrinks and interest rates head higher, according to Experian’s Business Pulse Monthly report for October.
Drawing on Reserve Bank of New Zealand (RBNZ) data, Experian found 17% of mortgage funding in August went to loans with a loan-to-value ratio (LVR) above 80%, up from 13% a year earlier. Lending at six times income or more made up 18% of funding.
Riskier lending as funding contracts
The shift comes as total mortgage funding declined for a third consecutive month, falling $313 million below last year’s level. The rise follows the RBNZ’s decision to ease its loan-to-value ratio restrictions from December 2025, allowing up to 25% of new owner-occupier lending to go to borrowers with deposits under 20%.
Experian’s analytics team flagged the trend as one to watch. “This increase in higher-leverage lending is noteworthy, particularly as interest rates head upwards,” the report said.
For mortgage advisers, the data points to more clients borrowing with smaller deposits or bigger debts relative to their income, at a time when the RBNZ, which held the official cash rate at 2.75% on 28 October in a split vote, has signalled that tighter policy is likely. Annual inflation eased to 3.7% in the September quarter but remains above the central bank’s target range.
Housing market still soft
The property market has yet to recover. According to Real Estate Institute of New Zealand (REINZ) figures cited in the report, 5,752 homes sold in September, up 6% on August but 9% lower than a year earlier. National house prices were down 2% on last year, and Auckland prices were down 3%.
Insolvencies rise, spending shifts
Business stress is building. Insolvencies reached 286 in September, up 18% on August and 15% higher than a year earlier, driven by increases in real estate and financial services.
Households, meanwhile, are changing how they spend. Essential spending fell 1.7% year-on-year in August, while discretionary spending rose 0.9%.
“Consumer spending remains restrained and underlying data points to changing spending choices rather than a uniform pullback,” the report said. Restaurant spending dropped 18.3% on a year earlier, while spending through food delivery apps rose 26.3%.
Read Experian’s Business Pulse Monthly report NZ for more insights.
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