New Zealand Sees Doubling of $2m-Plus Home Loans in Past Four Years

Discover the surprising trend in New Zealand's real estate market as the number of high-value home loans has doubled in just four years.

The number of Kiwi homeowners with mortgages exceeding $2 million has seen a significant increase over the past four years, according to data from Centrix credit bureau. In January, there were 14,188 borrowers with mortgages of $2 million or more, compared to 6441 in January 2020. Additionally, the number of borrowers with mortgages of $1 million or more doubled over the same period, rising from 53,317 to 107,538.

This surge in seven-figure mortgages comes amidst rising interest rates and growing financial pressure for homeowners in New Zealand. Centrix has cautioned that borrowers with mortgages exceeding $2 million are 21% more likely to fall into arrears compared to those with smaller loans. Repayments on a $2 million mortgage at a standard two-year fixed rate of 7.48% (over 25 years) amount to $6242 per fortnight or $162,292 annually. Recent borrowers are facing an additional $60,800 in interest payments per year compared to those who took out similar-sized loans in 2020.

The increase in interest rates has led some high-earning mortgage holders to take on additional work, such as driving for Uber Eats, to meet their mortgage obligations. The majority of homeowners with mortgages exceeding $2 million (74%) are located in Auckland, with Wellington, Waikato, and Christchurch making up smaller percentages. For mortgages of $1 million or more, Auckland also leads with 64%, followed by Wellington, Waikato, and Christchurch.

In Q4 of last year, the nationwide median sale price for first-home buyers was $720,000, with significant regional variations. Auckland first-home buyers faced the highest median purchase price at $935,000, while first-time buyers in Southland paid the least at $394,599. The highest purchase price for a first-home buyer in Q4 2023 was $5.8 million in Auckland's Takapuna, financed with a mortgage.

Research by Canstar indicates that average mortgages increased by 2% in the year to December 2023, leading to a 15% increase in mortgage repayments. Canstar's Pulse research also revealed that many Kiwis are cutting back on both non-essentials and essentials to cope with mortgage stress, which is prevalent in every region except Southland and the West Coast.

The significant rise in mortgages exceeding $2 million in New Zealand reflects the challenges faced by homeowners in a climate of increasing interest rates and financial pressure. As mortgage repayments continue to rise, many Kiwis are making sacrifices to meet their obligations and avoid falling into arrears.