As we close the book on 2025, many of our clients are asking the same question: Is the worst behind us?



Looking at the latest data from OneRoof and Cotality, the answer is a cautious "yes"—but with some important caveats for borrowers. 2025 was accurately predicted to be a year of "conflicting forces", where the benefit of lower mortgage rates battled against a weak economy and a flood of listings.

As your mortgage adviser, I’ve broken down the key trends from this recent report to help you understand what 2026 might look like for your home loan and property ambitions.

 

A Quick Look Back: The North-South Divide 

If you felt the market was disjointed last year, you weren't alone. It was truly a "tale of two islands". While affordability and a strong agricultural sector buoyed markets in the West Coast and Southland, Auckland saw weak value growth and properties sitting unsold for longer periods.

Understanding this regional variance is crucial. The national headlines don't always reflect what is happening in your specific suburb, which is why localised advice is vital before making a move.

 

The Economic Outlook: Green Shoots? 

The good news is that the recession appears to be over. Recent data suggests the economy is finally growing again, with positive prospects for 2026. Additionally, while net migration remains low compared to historical highs, it is rising—up to around 11,900 in the year to October—as the labour market begins to improve relative to Australia.

However, don't expect a sudden explosion in house prices. Experts are forecasting a modest value rise of around 5% over the next 12 months.

 

What Borrowers Need to Watch in 2026 

For those of you looking to refinance or purchase, here are the three critical factors that will shape the lending landscape this year:

1. The Interest Rate Environment While we have seen some relief, we aren't out of the woods. There has been recent upward pressure on some mortgage rates driven by rising wholesale rates. This brings the "fixed vs. floating" debate back to the forefront. The key questions for 2026 will be whether to fix for the long term and which bank offers the best strategic fit for your goals.
2. Regulation and "The Rules of the Game" 2026 is an election year, which invariably brings policy discussions. We can expect regulation to be a major theme, specifically regarding Loan-to-Value Ratios (LVRs), Debt-to-Income ratios (DTIs), and property taxes. These rules directly impact how much you can borrow, making it essential to have a broker who stays on top of compliance changes.
3. Supply Side Changes The Government is proposing significant changes to the Resource Management Act (RMA). If these changes stick, developing new housing and renovating older properties could become easier and cheaper. Interestingly, this increased ease of supply suggests that future capital gains might be lower than those seen in past decades, as housing shortages may become less acute.

 

Summary 

2026 looks to be a year of recovery, but a steady one rather than a sprint. With the economy growing and inflation indicators likely trending lower, the environment is stabilising. However, with regulatory changes on the horizon and mortgage rates still fluctuating, professional advice is more important than ever.

Analogy for the Road: Think of the 2026 property market like a car that has just come out of the mechanic's workshop after a breakdown. The engine is running again (the recession is over), and it's moving forward (modest growth), but we are still driving in a zone with strict speed limits (LVRs and DTIs) and variable weather conditions (interest rates). It is safe to drive, but you need to keep your hands firmly on the wheel and your eyes on the road.