Reserve Bank crashes mortgage market


According to Reserve Bank of New Zealand data, banks authorised only 13,795 new mortgages in July.

This was the lowest July approvals figure on record and was around half the level of July 2021 before the Reserve Bank began its monetary tightening cycle:

July mortgage approvals

The value of mortgages underwritten has also fallen dramatically.


The following chart depicts the annual value of new mortgages originated and shows that mortgage issuance fell 9% in the year to July:

New Zealand mortgage commitments

The volume of new mortgages originated declined from a high of $101.4 billion in August 2021 to just $60.8 billion in July 2023.

The Reserve Bank’s aggressive monetary tightening, which has pushed the official cash rate up from 0.25% in September 2021 to 5.50% currently, is the clear reason of the drop in mortgage demand.


According to the Reserve Bank’s latest Statement on Monetary Policy (SoMP), mortgage rates have continued to rise, as has the average mortgage rate paid by borrowers:

Mortgage rates

“The lagged impact of recent increases in mortgage rates has yet to impact household cash flow fully”, the SoMP noted.


“This reflects that the yield on total mortgage lending is expected to increase by 1 percentage point over the coming 12 months as borrowers roll onto higher interest rates”. 

Accordingly, mortgage demand should remain depressed, despite record immigration-driven population growth.

Rising mortgage rates and reducing borrowing capacity should continue to stifle demand.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.