Mortgage Lending on the Rise: Will NZ House Prices Increase?

Mortgage lending is surging, what that might mean for you

Mortgage lending is rising again, with fresh demand from buyers and busy refinancing activity as interest rates ease and confidence slowly returns. Market data from reporting company Centrix shows the average home loan across the country has now passed the $500,000 mark.

As you might expect, the average home loan size varies by major population centre:

• Auckland: $703,000
• Christchurch: $427,000
• Wellington: $569,000
• Hamilton: $535,000

The increase in average home loan size, and more measures, point to a property market stabilising after several years of decline.

Why is Mortgage Lending Increasing?

The rise in mortgage lending comes partly because of increases in the size of the average first home buyer loan, which is nearing the peak it last scaled in 2022 during a buying boom fuelled by low mortgage rates.

Also, the increase in the average home loan in the past 12 months has been partly fuelled by nearly 3,000 home loans exceeding one million dollars.

A range of other mortgage lending metrics have risen modestly from 2024, aligning with a market that has seen prices stabilise and become more active without overheating.

The Big Question: Where Next for House Prices?

The backdrop makes gloomy reading.

Nationally, home prices have fallen by over 17 percent in the last 45 months and are currently only 3.4 percent higher than they were five years ago. This has taken real housing prices in New Zealand back to pre-pandemic levels.

House Prices, Look Forward

Reputable forecasters have converged on predicting modest gains in 2025 with more typical growth in 2026, although there is a range.

The Reserve Bank's (RBNZ) admitted it was surprised house prices haven't been increasing as they expected. . The RBNZ also said only about half of the impact of the interest rate cuts made since last year has so far been transmitted through into the economy.

The RBNZ is now forecasting house prices will fall 0.3% for the full 2025 calendar year, after a surprising and substantial reversal since its last issued forecasts. The RBNZ then expects house prices start to rise again next year, up 3.9 percent by the end of 2026 and 5.0 percent by the end of 2027.

Most credible forecasters tend to agree. That is so long as interest rates continue to ease and the economy (especially unemployment) stabilises.

However, with the cost-of-living crisis continuing to bite, and economic wobbles continuing, many New Zealanders are still financially struggling. This makes a robust bounce back in house prices seem unlikely.

For example, the scale of Kiwi household's financial struggles is shown by the 478,000 people Centrix data shows are behind on at least one of their repayment obligations, such as a personal loan or power bill. This is a level that remains elevated beyond arrears levels between 2018 and 2023.

What This Means for You

Exactly what to do, or not do, with this information depends on your current situation, and what you hope to achieve moving forward.

For Homeowners With a Mortgage

Mortgage activity has been surging as people shopped around for better deals.

If you have not reviewed your mortgage since rates began falling, a refinance or restructure could reduce your monthly outgoings or shorten your loan term without increasing repayments. A huge number of mortgages, 79 percent according to one source, are due to come to the end of fixed terms in the next 12 months. This means many borrowers should benefit from lower rates easing the pressure on them.

The competition among lenders (banks) is intense, which can translate into sharper pricing or cash contributions subject to criteria. Before you make any major changes, be mindful of break costs on existing fixed term loans and weigh them against potential savings on offer.

Learn more:

• ‍Should you refinance your mortgage?
• Make the most of current mortgage interest rates
• Mistakes to avoid when you’ve got a mortgage
• Unlocking the secrets of mortgage cash back
• Should you make extra mortgage payments?

For First Home Buyers

The window remains favourable if you prepare well. Activity and approval data show first home buyers are active again, and average loan sizes indicate many are purchasing at realistic price points rather than stretching to buy property they can only just afford.

Build a clean loan application by reducing short term debts, demonstrate consistent savings, and be clear on budget buffers. If you are deciding between shorter and longer fixes, model repayments at different rates and stress test your budget before you commit to anything.

Learn more:

• ‍How to buy your first home
• Comeback begins for entry level buyers‍
• ‍Prepare for a home auction

For Investors and Upgraders

In the words of the last RBNZ: “Residential investment is expected to begin increasing from late 2025 because of lower interest rates, increasing population growth, and increasing real house prices.”

Listings remain elevated in many regions and debt to income settings can shape borrowing capacity, but rental markets, tax settings and the path of mortgage rates will drive individual outcomes.

A disciplined plan that accounts for maintenance, insurance and rates is essential, and portfolio decisions should reflect realistic capital growth assumptions rather than the double-digit gains of past cycles.

Learn more:

• ‍Is property investment still worth it?
• What to consider when buying an investment property
• When to become a property investor
• Property investment strategies every Kiwi should know

The Bottom Line: Mortgage Lending on The Rise

Lending momentum is improving, house price expectations are modest but positive, and the impact of interest rate relief (falling interest rates) is gradually working through the financial system.

As always, there are plenty of unknowns, and as always, the wise among us will stay laser focussed on what is controllable.

When it comes to property or mortgages, smart structuring and good decision-making can put real money back in your pocket without taking on unnecessary risks.

If you want a clear, personalised mortgage or property investment approach that balances payoff with certainty, talk to our team. Book your fast, free initial session with one of our financial advisers to learn more.