Fifth drop in amount households spend on interest
The amount households have to spend on interest payments has fallen for a fifth consecutive quarter, despite rising living costs.
Monday, July 6th 2026, 9:38AM
by Sally Lindsay
Westpac’s chart pack on household finances shows the drop in interest rates over the past year has helped household spending.
Westpac senior economist Satish Ranchhold says further significant falls in households’ borrowing cost are not expected over the remainder of the year.
While mortgage rates have been pushing upwards in recent months there’s been some scaling back of those increases in the past week.
Essentially the main banks are now not competing on prices over their three to five-year interest rates.
Swap rates moved down by about 15 bps and the drop in the major banks’ long-term interest rates reflect these wholesale rates.
Three-year rates range between 5.19% and 5.29% while four-year rates are between 5.49% and 6.49%.
Despite a backdrop of renewed concerns about inflation in the wake of the US and Iran war and an easing of tensions in the Middle East over the past few weeks, the RBNZ is still expected to raise the OCR at a measured pace over the coming months, which will affect short-term interest rates.
Even if mortgage rates rise, Ranchhod says the bank doesn’t expect a significant rise in households’ interest costs over the next few months because 90% of New Zealand mortgage borrowing is fixed for a period usually for terms of one to two years.
Financial assets values up but land and buildings down
The value of households’ financial assets has continued to rise and is up 3.3% over the past year.
The latest Cotality data shows $234 billion is held in New Zealand Superannuation and KiwiSaver, $187 billion in New Zealand listed shares and $342 billion in commercial real estate.
However, on the residential side the value of housing and land assets is down 0.5% and remains essentially unchanged since 2023, which has resulted in only limited growth in overall wealth levels.
More than $1.67 trillion is tied up in 1.73 million homes that have $398 billion in outstanding mortgage debt.
About 48% of household assets are held in residential real estate – a 5% increase since 2021, according to Cotality.
Incomes rise as household numbers up
Over the past year, overall household disposable income levels have risen by around 5%. In part that rise was due to the 1.5% increase in the number of households.
Adjusting for population changes, Westpac’s estimate of the average household’s disposable income rose 3.8% in the year to March, up from 3.1% at the end of last year.
While overall incomes have been rising, that’s mainly due to increases in entrepreneurial earnings, which are up 14% over the past year.
That will include stronger earnings in the agricultural sector, which has been boosted by the strength in commodity export prices, Ranchhod says.
That lift in agricultural earnings has been reflected in stronger economic confidence and spending in many rural regions.
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