New Zealand Homeowners and Investors Increasingly Opt for Short-Term Mortgages, Banking on Interest Rate Relief
Date Published: 8 February 2024
Key Facts
- New Zealand home-owner occupiers are preferring to fix their mortgages on shorter terms.
- Most popular loan term is now one-year fixed, which accounted for 27.7% of all lending in December 2023.
- New lending for owner-occupiers rose in December to $4.948 billion from $4.653 billion in the previous month.
- Two-year loan terms decreased to 20.6% in December and 18-month loans increased in popularity, rising to 18.7%.
- For residential investors, one-year terms also rated highest, amounting to 33.4% of new lending.
Article Summary
The figures for December 2023 from the Reserve Bank of New Zealand (RBNZ) reveal that home-owner occupiers are increasingly settling on shorter fixed mortgage terms. The data shows a clear trend towards fixed mortgages of one year, which made up 27.7% of all new lending. This is a rise from 26.4% in November. Home-owner lending in total saw a bump from November numbers, with the value reaching $4.948 billion in December 2023.
Mortgages with two-year terms, while having gone down slightly in share, were second in popularity following one-year terms. Attention has also been drawn to the increase in 18-month fixed term loans, gaining momentum from a mere 8.3% in December 2022 to a high of 18.7% in December 2023. Another trend worth noting is the uptick in six-month fixed terms, resulting from homeowners’ anticipations of falling interest rates.
Amongst residential investors, a similar emphasis on one-year fixed term loans has been observed, claiming 33.4% of new lending. Notably, the share of investors choosing six-month fixed terms saw a rise to 8.5%. Meanwhile, two and three-year fixed terms saw a downward shift. Regardless of whether one is an owner-occupier or an investor, the trend is towards opting for shorter fixed terms, in expectation of rate cuts in the shorter term rather than later.
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