2025 brings financial relief for NZ households – Westpac

Mortgage cuts to boost NZ household finances

2025 brings financial relief for NZ households – Westpac

As we move into 2025, many New Zealand families can anticipate some financial relief after a challenging period, latest Westpac insights showed.

Satish Ranchhod (pictured above), senior economist at Westpac, outlined in his latest report that 2024 saw economic growth decelerate and unemployment rise, which in turn stifled household income growth while living costs escalated.

Forecasted economic recovery

The upcoming year, however, holds promising developments for household economics.

Thanks to diminishing inflation rates, the Reserve Bank (RBNZ) has been able to lower the OCR, leading to subsequent declines in mortgage rates.

This financial environment is set to benefit nearly half of all homeowners with fixed-rate mortgages, who are due to renegotiate their terms within the next six months.

Impact of lower mortgage rates

This reduction in mortgage rates is expected to significantly enhance household disposable incomes.

Ranchhod provided an example to illustrate this point: a homeowner with an average-priced property carrying a 50% mortgage balance could see their monthly payments drop by about $300 if they refix their mortgage for another year at current rates.

In regions like Auckland, where property values are generally higher, the reduction in monthly mortgage expenses could exceed $400.

Moderate economic growth ahead

While the drop in borrowing costs is substantial, it is important to note that interest rates are expected to stabilise at average levels, not the exceptionally low rates seen post-pandemic.

Consequently, the economic revival and recovery in the housing market are projected to be steady, aligning more closely with traditional growth rates rather than the heightened levels experienced recently.

This balanced return to normalcy promises a more stable financial landscape for New Zealand households, making 2025 a year of potential economic recovery and personal financial improvement.