THE EMOTIONAL ECONOMY
New Zealand’ s economic recovery is not just about policy or spreadsheets, it’ s about perception.
The reality is that New Zealand households don’ t feel better off. Consumer prices are still rising – up 23 per cent in five years – and supermarket staples including butter remain poster children for the cost-of-living squeeze.
Labour markets have softened, wage growth has slowed, and many households remain cautious about future income security.
These psychological barriers matter. When people feel uncertain about their financial future, they hold back. Lower mortgage rates may improve cash flow, but if asset values are flat and job security feels fragile, that cash stays in the bank.
“ Lower mortgage rates may improve cash flow, but if asset values are flat and job security feels fragile, that cash stays in the bank.”
THE REPRICING MOMENT
This brings us to what may be the real inflexion point for residential activity: mortgage repricing. Over the coming months, tens of thousands of borrowers will roll off fixedterm loans taken out at peak rates in 2023 and early 2024. Many will shift from paying six to seven per cent interest to rates closer to four to five per cent.
This isn’ t just an accounting detail; it’ s a substantial shift in household disposable income. For a borrower with a $ 600,000 mortgage, a 200-basis-point reduction could translate to more than $ 700 a month in reduced payments.
That’ s real money, and in aggregate, it has the potential to lift both confidence and consumption.
In contrast to early rate cuts, which largely benefitted new borrowers, this wave of repricing affects existing homeowners. These are households with skin in the game, equity in their homes, and crucially, intent to move, upgrade, invest or downsize.
If the numbers suddenly stack up again, the decisionmaking dynamic changes.
RAY WHITE NOW NEW ZEALAND | 22