Falling house prices are failing to make repayments cheaper

Summarised by Centrist

First-home buyers can pay less for a house and still face higher mortgage repayments, as rising interest rates outweigh falling prices at the affordable end of the market.

Interest.co.nz reports the national lower-quartile sale price fell $41,000, from $616,000 in November 2025 to $575,000 in August 2026. Over the same period, the main banks’ average two-year fixed mortgage rate rose from 4.49% to 5.45%.

Assuming a 20% deposit and a 30-year loan, estimated repayments increased from $575 to $599 a week. 

Buyers would need $8,200 less for their deposit and borrow $32,800 less, but pay an extra $24 weekly.

Repayments rose in most regions. Wellington and Nelson/Marlborough were the exceptions, where larger price falls outweighed higher rates.

Fresh bank increases suggest the pressure is continuing. Kiwibank has raised most fixed mortgage rates, including its one-year rate by 0.20 percentage points to 5.15%. Its two-year rate remains unchanged at 5.39%.

In a separate report, interest.co.nz says rising international bond yields and New Zealand wholesale borrowing rates could trigger further fixed-rate increases. That means borrowing costs can rise ahead of any further Reserve Bank decision.

Financial markets are increasingly betting on an October Official Cash Rate increase, although that remains uncertain.

“The spring real estate selling season is not going to get encouragement from home loan rates,” writes interest.co.nz’s David Chaston.

Read more at interest here and here

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