1. Plenty going on beneath the surface
Last week I took a detailed look at recent mortgage trends, not just the continued growth in new lending flows and the stock of outstanding loans, but much else besides. For example, bank switching remains popular, given the short structure of many existing loans and the ability to jump ship with low or no break fees. Interest-only loans remain controlled, while the share of activity going out at a high loan-to-value ratio also remains well below the current speed limits (soon to be loosened next month) – albeit first-home buyers continue to operate well in this environment, with more than half of loans to this group in September being done at less than 20% deposit.
It’s also interesting to note that mortgage payment stress appears to have peaked at a relatively low level by past standards, and indeed, banks have recently been trimming their bad debt provisions. In theory, the debt-to-income ratio restrictions – which I suspect will become a much bigger talking point in 2026 – should help to keep non-performing loans under control in future too.
2. Leaning towards the shorter end again
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Hot on the heels of that analysis, we then got the latest RBNZ mortgage lending data split for September. It showed that 79% of new loans were either floating or fixed for 6-12 months, the highest share since February. In other words, there’s been a renewed drift towards shorter-term loans recently, which isn’t a surprise – most of the commentary throughout September, as we built towards October’s eventual 0.5% OCR cut, was that interest rates had further to fall, hence the preference to go short and keep riding that wave down. It seems likely this approach could continue for the next few months too, but at some stage, there may well be some tricky choices around when to fix for longer.
Cotality chief economist Kelvin Davidson: "Mortgage payment stress appears to have peaked at a relatively low level by past standards." Photo / Peter Meecham
3. The start of the next construction upturn may have arrived
After a long and deep downturn from a very high peak in 2022, there are now clearer signs that the number of new dwellings being consented has begun to rise again. There were around 3,750 consents in September, up by a solid 27% from the same month in 2024, and the third rise in the past four months. As such, after hovering around 33,500-34,000 for quite a while, the annual running total for consents has now lifted back towards 35,000, close to an 18-month high. That’s great news: for wider economic growth, for house-builders, and from the perspective of keeping housing affordability pressures in check over the medium term.
4. Higher unemployment, but probably the peak
Meanwhile, in less encouraging news, Stats NZ reported last week that the unemployment rate rose from 5.2% in Q2 to 5.3% in Q3, the highest since late 2016. Employment was flat and the labour force participation rate actually fell (the so-called discouraged worker effect), so the rise in unemployment was all down to simply having a larger working-age population. Clearly, any rise in the unemployment rate is unwelcome, but this does now look likely to be the worst of it. Indeed, surveys of firms’ employment intentions are improving, and actual employment measures such as filled jobs also seem to have turned a corner. A slowly strengthening economy and labour market in 2026 adds to the case for thinking that property sales and values will rise next year.
5. Low migration is still weighing on rents
On Thursday this week, we’ll get September’s net migration data and it’s likely they will have stayed low. The weakness of migration is really showing up in flat/falling property rents at the moment.
- Kelvin Davidson is chief economist at property insights firm Cotality
