First home buyers embarked on a debt binge in 2025, with their mortgage approvals hitting a record high.
According to Reserve Bank figures, almost $19 billion of new mortgages were approved to first home buyers in 2025. That was up a whopping 18.8% compared to 2024, and is almost certainly a record high for annual mortgage lending to first home buyers. (Reserve Bank figures in this data series go back to 2014).
Mortgage activity was particularly strong towards the end of last year, with approvals to first home buyers hitting $2.15 billion in the month of December, up a third compared to December 2024.
That was the first time mortgage approvals to first home buyers have exceeded $2 billion in any month of the year.
Those were not the only new mortgage records to be set by first home buyers last year.
The average size of the loans approved to first home buyers hit a record high of $597,720 last December, trumping the previous high of $595,398 set at the height of the last housing boom in May 2022.
The figures suggest first home buyers are tending to fall into two main groups.
Those who tend to be a bit more cautious and are buying cheaper properties with at least a 20% deposit, and those who are stretching themselves by taking out low equity loans to buy more expensive properties.
More than 40% of the mortgages approved to first home buyers last year were the higher risk, low equity loans, where buyers had less than a 20% deposit.
The number of low equity mortgages approved to first home buyers hit a record monthly high of 1500 in December, up 42% from December 2024.
The percentage of first home buyers taking out low equity loans has been steadily rising for more than a decade, from 25.9% in December 2014 and hitting a monthly high of 46% in September last year, before dropping back to 41.7% in December.
The average size of the low equity mortgages approved to first home buyers in December was $651,000, compared to $559,000 for first home borrowers with at least a 20% deposit.
This was accompanied by an increase in the prices first home buyers were paying for a home.
Interest.co.nz estimates their average purchase price increased to $709,000 in December 2025 from $672,000 in December 2024, up 5.5%.
By comparison, the Real Estate Institute of New Zealand's House Price Index decreased 0.4% over the same period.
First home buyers buying with less than a 20% deposit are particularly at risk because they have less equity in their property and therefore less room to rearrange their finances if they suffer a financial setback such as a reduction in income, or a steep rise in mortgage interest rates.
That risk is compounded if it occurs at the same time as a reduction in property values.
However, as the latest figures show, there are plenty of both borrowers and lenders prepared to take the risk.
15 Comments
Our private debt (to foreign owned entities), and the degree of leverage, just keeps growing and looks to be a greater threat to our long term viability than our public debt - particularly in light of our falling GDP per capita reducing our ability to service debt across the board.
The risky, low equity end, borrowing $651,000. That's a fat chunk of large debt for the cheapy "starter house"
What could possibly go wrong?
- Interest rates marching up and climbing the inflation chasing ladder.........
"Caaant go wrong on houses maaaate" until "wrong" turns up and slaps you on the face.
What could possibly go wrong?
You could lose your job and be unable to service the debt.
They could find a way to produce new houses for 1/2 today's costs.
They can be made much cheaper, dump the house on a plot of land and leave the good ole kiwi bloke to do the driveway, paths, fences, landscaping and plantings.
Shame the good Kiwi bloke is now mostly bred out of the under 45 year olds, new imports are mostly useless on good quality outdoor DIY.
I suspect most kiwi blokes & blokesses nowadays don't have enough family & friends covering the main trades, as used to be common. We used to learn a lot of useful skills helping each other out with a few subject matter experts.
Although land price is much more an issue today: the old normal was a third cost for the section & 2/3 for the build. People bought their section first & paid it off until they could leverage it with a mortgage into a house.
Although land price is much more an issue today: the old normal was a third cost for the section & 2/3 for the build. People bought their section first & paid it off until they could leverage it with a mortgage into a house.
It's really not that much different today, unless you're talking prime prime real estate. In which case, the build cost is actually more than 2/3.
They can be made much cheaper, dump the house on a plot of land and leave the good ole kiwi bloke to do the driveway, paths, fences, landscaping and plantings.
They can't be made much cheaper and be compliant enough for the average income to fund.
The nature and complexity of building now (the physical process hasn't changed much, but the legislative requirements only get tougher) means the average layperson is generally incapable of building their own house today. And if their time is worth any decent money, it's also more efficient to get a professional to do it.
Oh yes, they can, just look at Simplicity Living. Their built cost per sqm is far lower than your average builder. They've done this by removing inefficiencies in the process and focusing on vertical integration. I'm sure it would be similar if you did similar with single homes. One just needs to think outside the box.
I'm in the trades, and the cost is generally the cost. It's been a long time since I've encountered a large developer or project management company who even understands what building efficiently means. Everyone sees the answer as thinking outside the box, but really the answer is in concentrating on the basics. If you're building apartments you get economies of scale I guess.
If simplicity has managed a model that dramatically lowers the square meter cost, then in 4-5 years they will be the primary entry level house manufacturer in the country.
Would you like to make a wager on that?
I've been planning Reno's and I'm only allowed to do half the work to keep it compliant, and buying the tools to do the work are a quarter of the total cost, even if buying second hand.
Couple that with our bank being not friendly to diy, meaning you have to save up cash first before you can do anything
Ayup. Between the council, Bank and insurance company is fairly sewn up that work needs to be certifiable for them to approve it.
buying the tools to do the work are a quarter of the total cost, even if buying second hand.
you can sell them again on Trademe at the end or keep for the next job, I built a 108sq m stables for horses and horse truck, next time I will be faster as had to learn a few lessons the hard way, but i now have the tools. In general I do not do large concrete jobs, let the boys do it in 3 days rather me over countless weekends.
Fencing is not hard
That explains why spending is still low. A whole lot of disposable income going into getting out of a low equity penalty position. Good for those buyers, I say.
I'd still say that overall mortgage debt is being paid down faster than it's growing.
Probably not great - still think there's a reasonable chance prices drop another 10% or more from here which would see these low equity loans underwater.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.