According to the RBNZ’s latest monthly figures, nearly 60 per cent of new mortgages in March were fixed for one or two years. Specifically, $1.723 billion of the $5.725 billion in new lending was fixed for one year (30.1 per cent). $1.644 billion (28.7 per cent) was fixed for two years. This represents a significant shift from the prior month, when floating-rate mortgages accounted for a hefty 39.8 per cent of lending.
This reversal suggests that many borrowers now believe interest rates have either peaked. The RBNZ began cutting the Official Cash Rate (OCR) from 5.5 per cent in August last year, bringing it down to the current 3.5 per cent. Major banks have followed this downward trend, prompting home buyers and existing mortgage holders to reevaluate their options.
Short-term fixed rates also saw a dip in popularity. These accounted for just 11.4 per cent of new owner-occupier lending in March, 17.5 per cent down from February. Borrowers appear to be leaning into the relatively stable and low interest rates currently available for the one- and two-year brackets. Special offers from major banks around 4.99 per cent for both.
The shift marks a departure from the early months of 2024. Then, the anticipation of further rate cuts led many to keep their mortgage terms short or floating rates to capitalise on potential savings. As global political and economic conditions remain unpredictable, sentiment now seems to favour locking in the current favourable rates.
The trend isn’t limited to owner-occupiers. Residential property investors also moved in the same direction in March. Lending to investors rose from $1.7 billion in February to $2.2 billion in March. Fixed terms were notably more popular in this group as well, with 31.1 per cent of new investor lending fixed for one year (up from 21.7 per cent) and 26.5 per cent fixed for two years (up from 11.6 per cent). Floating rate usage fell to 26 per cent from a previous 43 per cent.
The numbers show a shift in strategy as Kiwis respond to changing conditions in both domestic interest rates and the broader global economy. As interest rates appear to be stabilising, mortgage holders are showing more confidence in locking in medium-term rates, potentially signalling the beginning of a more stable lending environment.
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