Savings climb but housing wealth stays flat as rate hikes return
New Zealand households are paying more in interest for the first time in two years, signalling the end of a period in which falling mortgage rates helped support spending, according to Westpac’s analysis of the latest Stats NZ household figures.
Household spending on interest rose 0.3% in the June 2026 quarter. While the increase was small, Westpac senior economist Satish Ranchhod (pictured) said it marked a turning point for borrowers.
“The easing in average borrowing costs seen over the past few years has come to a close with the RBNZ’s hiking cycle now in train,” Ranchhod wrote.
Borrowing costs turn higher
As fixed terms expired and borrowers refinanced at lower rates, repayments fell and household budgets got some breathing room. With the Reserve Bank (RBNZ) now lifting the official cash rate (OCR), mortgage rates have started climbing again.
Ranchhod does not expect a sharp jump in average household borrowing costs, but said the boost to spending from falling repayments has run its course.
“However, we won’t see the same support for spending that we did over the past few years,” he said.
The OCR now sits at 2.75% after the RBNZ’s second hike since tightening resumed in July, with Westpac forecasting a pause at the 28 October review before a further rise in December.
Savings build as incomes rise
Other parts of the household picture are firmer. Disposable incomes grew 5.2% in the year to June, down from 6.5% in the year to March, with much of the gain coming from a 12% rise in entrepreneurial earnings, helped by strong agricultural export prices.
Wage and salary growth has been more modest, at 2.7% over the year, still below annual inflation of 4.1%.
Households added $2.5 billion to their savings during the quarter, extending a three-year run of rising savings. The savings rate sat at 3.7% of disposable income.
Housing wealth stalls
Overall household wealth rose 1.9% over the year, but the mix is shifting. Financial assets grew 4.6%, while housing and land values slipped 0.9% and have barely moved since late 2023.
“We expect housing market conditions will remain soft over the coming year, limiting increases in overall household wealth,” Ranchhod said.
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