Cotality data shows longer fixed terms and cautious borrowing as growth stalls
Mortgage lending growth in New Zealand has slowed to its weakest pace in almost three years, according to Cotality's latest Pulse report, with growth dipping "near zero" in May and June.
The slowdown mirrors the broader pullback in property sales activity, but the underlying data suggests borrowers and banks are managing the slower conditions carefully, rather than showing signs of stress.
Loan quality remains solid despite the slowdown. Interest-only lending, often a signal of borrower cashflow pressure, is running at its lowest level in more than a decade, at around 14% of new loans to owner-occupiers and 28% to investors by value — activity Cotality describes as remaining "under control." Just 0.6% of the value of outstanding loans is classed as non-performing, roughly half the level seen after the Global Financial Crisis, while banks' bad debt provisioning has eased back to late-2022 levels.
First-home buyers still leading, investors more constrained
Loan-to-value ratio (LVR) restrictions are not proving a major handbrake on the market currently, with only around 16% of owner-occupier lending done below a 20% deposit in June, comfortably under the official 25% cap.
First-home buyers continue to dominate this space, accounting for roughly 70% of all high-LVR lending in June, with 55% of all first-home buyer loans written at more than 80% LVR. Investors, by contrast, appear closer to their limits, with nearly 5% of investor lending done below a 30% deposit — testing what Cotality describes as banks' own "self-enforced limit of perhaps 5%," well under the official 10% speed limit.
Serviceability testing, rather than debt-to-income caps, remains the bigger constraint on borrowers. Only around 10% of lending is currently done at high DTIs after exemptions, such as new-builds, well below the official 20% speed limit, according to Cotality's June data.
Cotality suggests borrowers being declined finance are more likely being caught by banks' internal serviceability tests, such as assessing affordability at a theoretical rate near 7%, than by the official credit rules themselves.
Borrowers locking in longer terms
One of the sharpest shifts has been in fixed-term preferences. As recently as November 2025, fewer than 20% of new loans were fixed beyond 12 months; that figure has since jumped to the mid-50s% over the past five months, with two-year fixes proving especially popular, as borrowers guard against further rate rises.
Refinancing activity also remains elevated: June's $2.3 billion refinancing figure was the highest monthly total since July last year and the fourth-highest on record since 2017, excluding a December switching bonanza when all major banks offered 1.5% cashback, as borrowers continue chasing incentives despite muted overall lending growth.
The stock of outstanding mortgage debt has also passed $400 billion for the first time, up from $300 billion as recently as December 2020. Against Cotality's estimate of New Zealand's total housing stock value of almost $1.7 trillion, aggregate mortgage debt remains low, leaving high "paper equity" across the market. But for the estimated one-third of households carrying that debt, Cotality notes "the swings and roundabouts of mortgage rates and credit policy are more acute."
Looking ahead, Cotality expects new lending activity to remain in a slowdown if interest rates come under renewed upward pressure in the months ahead. Even so, with repayment stress at a low base, first-home buyers are likely to remain, in Cotality's words, "a fruitful group for lenders," while banks focus on retaining existing borrowers at refix time even as they compete for new market share.
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