Mortgage meltdown torches New Zealand’s housing market

The latest mortgage data from the Reserve Bank of New Zealand (RBNZ) paints a worrying picture for the nation’s housing market.

This month’s RBNZ Financial Stability Report showed that fixed mortgage rates have already soared above pre-pandemic levels, with floating rates playing catch-up:

Average mortgage rates

The follow-up Monetary Policy Statement (MPS), released last week, forecast that average mortgage rates will soar to around 6% next year, which is more than double their pandemic low:

Forecast mortgage rates

In turn, the indicative mortgage debt servicing ratio for new buyers has soared and is fast approaching the 2007-08 Global Financial Crisis peak:

Mortgage debt servicing ratio

The forecast trajectory of mortgage rates suggests the indicative debt servicing ratio will soon rise to its highest ever level, placing extreme financial strain on mortgaged New Zealand households.

The latest RBNZ data on mortgage finance commitments shows that demand has already collapsed, with the value of mortgage commitments down 30% in the year to April 2022. This represents a sharp turnaround from the 128% annual mortgage growth recorded in May 2021:

New Zealand mortgage commitments

Given the RBNZ has flagged aggressive rate hikes over the next 12 months, it is fair to assume that buyer demand will fall even further. This will place additional downward pressure on house prices, which have already fallen 5% nationally since November 2021.

The RBNZ’s MPS said that it expects “house prices to fall by about 14% by early 2024”, suggesting an additional 9% decline from current levels.

The RBNZ’s forecast seems optimistic given its hawkish stance on interest rates. Given New Zealand house prices soared around 40% over the pandemic on the back of rock bottom rates, it stands to reason that house prices could fall more sharply than forecast as mortgage rates are doubled from their pandemic lows.

New Zealand’s interest rate and housing cycle is running around six months ahead of Australia’s. Thus, it offers a glimpse of what could be in store for Australia as we navigate our own housing correction.

Unconventional Economist


  1. I don’t see a problem.
    40% up in 2 years and we barely hear boo, lots of cheers. These people that borrowed money knew prices were high and interest rates would eventually rise so what’s the issue. FFS

    • The Travelling PhantomMEMBER

      Couldn’t agree more, all of this crying is over projected 14% decline by 2024! (18 months ™️🍷)

  2. … We’re leavin’ together
    But still it’s farewell
    And maybe we’ll come back
    To Earth, who can tell?
    I guess there is no one to blame
    We’re leaving ground (leaving ground)
    Will things ever be the same again?

    … It’s the mortgage meltdown
    The mortgage meltdown

  3. Hugh PavletichMEMBER

    (NEW) Poll: National still on top, Labour dips again … 1News TVNZ

    A loud, late +50 basis points echo. First Kiwibank, next ANZ … David Chaston … Interest Co NZ

    Five responses to Government’s supermarket changes … Melanie Carroll and Gerhard Uys … Stuff NZ

    Money changes everything: Kiwis quitting cities in search of low-cost life … Kevin Norquay and Olivia Caldwell … Stuff New Zealand
    … google search ‘housing affordability stuff new zealand’ …

    • – Labour has the bad luck that it’s in power right now and now people are going to blame everything bad on Labour. it would have been the same when the Nationals would have been in power.
      – We see a similar situation in Australia. The Liberals were the unfortunate schmucks who were in power in Canberra in early 2022 and got replaced by Labor.

    • Watch for Kiwibank to be the first to require bailout.
      The Aussie banks couldn’t wait to offload unprofitable customers onto those fools.

  4. Jumping jack flash

    I think it will play out fairly identical to 2007. Rates rise in 2022 until a couple of banks go bust in 2023 then by 2024/2025 they’ll have slashed rates again, implemented QEx and opened the credit window and maybe even implemented a UBI.

    The issue is that everything is debt. My wages, your wages. My, and almost all jobs, only exist due to someone’s debt spending. It was this way in 2007. Nothing has changed since then in fact it is probably worse. We have less manufacturing now than in 2007. More small businesses and gigs that provide services, and sell imported items, all paid for with debt.

    Its not just the houses and mortgages, although thats a big part of it.

  5. Aggregate mortgage lending commitments for the year ending April 2022 were only 700 million lower than for the year ending 2021, ( RBNZ ) but 30 percent higher than the comparable 2020 period Surprisingly first home buyers accounted for some 16.34 billion ,in the April 2022 period, which was higher than the prior year. Using monthly comparisons without context and headlining a mortgage meltdown ?

    • March 2020 was when Covid Lockdown happened?
      You’d expect 30% higher than that period when NZ was totally locked down.

      • According to the chart, and the commentary, mortgage growth surged 128 percent on a comparable monthly basis in 2021. As you state, there was the minor issue of initial lockdowns, then mortgage ” holidays”. Using monthly comparisons without context is pointless. Absolutely agree. For context the figures I provided were aggregates for the calendar years, not a singular skewed month

  6. I wonder if there is not enough inputs being calculated to determine the true outcome?
    If NZ property went up in 2 years 40%, then a drop of 30% would have it back to the same level as pre covid.
    So how many people would be effected and to what degree, except emotionally, those believing they have lost something that they never had, as it was an evaluation.
    Bare with me.
    If the above case pans out, anyone who had bought pre covid, would not be effected, except having to pay more on their morgage.
    So the only people to be effected would be those that purchased in the last 2 years. But that further needs to be split into 2 groups, FHB and EHB. The first would be effected the most and face negative equity, which sucks, but what percentage of the population is in this category.
    The existing home buyers who upgraded or downgraded could also be analysed.
    I have deliberately left out investors, they have to take the highs with the lows.

  7. NZ was vastly overpriced in 2019. Getting back to those levels is still overpriced, and needs to continue down from that point.
    It’s not me that tells you that, but John Key, our PM in 2008 who noted even back then that ‘something had to be done to correct the property market’. He didn’t follow though. Neither did his successor Jacinda Ardern – both for political reasons.
    Now we have a Governor of our RBNZ with spine and courage; doing what the politicians have failed to do.
    Let’s see how far and fast he gets on with what has to be done.

  8. Jeez I despise that treasonous, lying, horse toothed, scrawny piece of sh1t. I had such high hopes for her. Sorta like the hopes I had for Malcolm Trumble.

    I know. I’m a chump. Won’t get fooled again.

      • Given that we’ve endured LNP gummint her for 20 of the last 26 years, and the ALP years were under the deranged narcissist Rudd and the cynical, opportunist Gillard…well…yes…you’re right. And the future under Albo and his idiot mates isn’t looking too bright either. I think everybody in the entire fcking country could do with a big hug right now.

  9. Hugh PavletichMEMBER

    United States … and more …

    The Global Era Of Accelerated And Unstoppable Increasingly Affordable Urban Decentralization And Dispersal …

    Core City Population Losses Detailed … Wendell Cox of Demographia … Youtube

    We are living amidst a sea change in demographic trends. According to the Census Bureau, the United States last year experienced its lowest population growth “since the founding of the nation” more than 230 years ago. This first full year of the pandemic estimates registered an annual growth rate to July 1, 2021 of 0.12%, a rate even lower than during the Spanish flu and World War I, from 1918 to 1919. Throughout the most recent decade, the nation’s annual growth rate had already been declining, as indicated in Figure 1 from the Census Bureau. … read more via hyperlink above …

    … a perspective from Ireland …

    30% would take lower-paid job to guarantee remote work – survey … Brian O’Donovan … RTE Ireland

    … New Zealand …

    Money changes everything: Kiwis quitting cities in search of low-cost life … Kevin Norquay and Olivia Caldwell … Stuff New Zealand
    … google search ‘housing affordability stuff new zealand’ …

  10. Hugh PavletichMEMBER

    Supermarket giant Aldi eyes New Zealand, joining Costco to shake-up duopoly … Kirsty Wynn … New Zealand Herald

    International grocery giant Aldi is eyeing up New Zealand in a move that could shake up the tightly-held supermarket sector.

    Acting Prime Minister Grant Robertson confirmed today that the German-owned chain was “one of the players” interested in the New Zealand market.

    Questioned on RNZ about which supermarkets were in talks with the Government, Robertson said there were some “in the Australian market people can take a look at”.

    Asked if Aldi was one Robertson said: “Aldi is one of the players but I am not going to announce things to people today.” … read more via hyperlink above …

  11. Hugh PavletichMEMBER

    New dwelling consents declined 30% in April compared to March … Greg Ninness … Interest Co NZ

    The number of new dwellings consented in April dropped sharply.

    According to Statistics New Zealand, 3719 new dwellings were consented in April, down 30% compared to March, and down 6.9% compared to April last year.

    However it is too soon to say if the decline was part of a longer term trend … read more via hyperlink above …

    Building consents issued: April 2022 … Statistics NZ

  12. 60% of median disposable income for P&I debt service!!!!!!!

    Interest rates rising further.

    House prices will get hammered at these levels of affordability.