Shorter Mortgage Terms Grow in Popularity Amongst NZ Homeowners and Investors, Hints Reserve Bank Data

Date Published: 9 February 2024

Key Facts

• The ‘go short’ trend in New Zealand’s mortgage lending, a preference for shorter fixed term mortgages, has continued to be evident in the latest available figures for December 2023.
• The Reserve Bank (RBNZ) reports that new owner-occupier lending increased to $4.948 billion in December from $4.653 billion in November.
• The most popular term for owner-occupier lending is the one-year fixed term, accounting for 27.7% of all new lending, up from 26.4% in November.
• Next in popularity was the two-year term, but these have been decreasing in share recently, dropping to 20.6% in December from 21.3% in November.
• Eighteen-month fixed term and six-month fixed term mortgages have been on the rise, increasing to 18.7% and 6.5% of all new lending, respectively, in December.
• The share of owner-occupier lending on longer terms (two, three, four and five years) has been decreasing.
• New residential investor mortgage lending remained stable at $1.4 billion in December, with one-year fixed terms being the most popular, comprising 33.4% of new lending.

Article Summary

The latest data from the Reserve Bank of New Zealand (RBNZ) confirms the continuing trend towards shorter fixed-term mortgages in the country’s housing market. For the month of December 2023, total new lending for owner-occupiers increased to $4.948 billion, demonstrating this ‘go short’ philosophy. The most favoured term was the one-year fixed term, accounting for 27.7% of all new lending. However, there’s been an evident shift in preference towards the less traditional 18-month term and six-month term mortgages, whose shares increased to 18.7% and 6.5% respectively. In contrast, longer-term mortgages of two, three, four and five years have seen a decrease in uptake among owner-occupiers. Conversely, the mortgage behaviour of property investors has remained static with new residential investor mortgage lending remaining at $1.4 billion in December. Like the owner-occupiers, one-year fixed terms remained the favourite among investors. The anticipation of interest rates dropping soon has influenced a rise in those adopting six-month fixed terms. However, the final decision on rate relief rests with the RBNZ.

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