About 3600 first-home buyers underwater as ANZ passes on OCR hike

About 3,600 first-home-buyer households nationwide now owe more on their mortgages than their homes are worth, Cotality chief economist Kelvin Davidson estimates, assuming a 20% deposit at purchase.

The true count is higher. Davidson stresses many peak-era buyers put down less than 20%, so the underwater cohort is larger than the 20% deposit baseline implies. Cotality also notes roughly 29,000 first-home buyers purchased in the 18-month peak window. A large share of those dwellings still sit below purchase price even if not every loan is strictly underwater.

Most of the estimated negative-equity cases bought in late 2021 and early 2022. Cotality’s June 2026 Home Value Index put the national median dwelling value at $806,512 — still 17.5% below the early-2022 peak of $977,387. Auckland values are about 23.6% off peak. Wellington is about 26% down. Christchurch is only 1.6% below peak. Parts of Canterbury and Otago have reclaimed nominal highs.

BNZ chief economist Mike Jones framed the same cycle with REINZ data in June. The REINZ house price index remained about 15% below the November 2021 peak in nominal terms and about 28% lower in real terms — back to mid-2019 levels — after a 43% boom in the 18 months to the peak.

This is a balance-sheet lock-in story, not a foreclosure wave. Davidson and mortgage advisers make the same cash-flow point: banks do not call loans merely because loan-to-value ratios have drifted above 100%. They care about contractual servicing. RBNZ bank asset-quality data for March 2026 show the housing non-performing loan ratio at 0.56%, with the system NPL ratio at 0.68%. Housing NPLs remain well below the roughly 1.2% housing NPL ratios common after the global financial crisis.

Centrix’s July 2026 Credit Indicator put residential mortgage arrears at 1.22% — about 19,900 accounts past due — up slightly from 1.20% in June but about 12% below a year earlier. Seasonally adjusted 90-day delinquencies were down about 15% year on year. The May 2026 Financial Stability Report stressed strong bank capital buffers and low mortgagee-sale incidence.

The timing still bites. The Reserve Bank lifted the OCR 25 basis points to 2.75% on 2 September 2026 — its second consecutive hike after July’s move to 2.50%. ANZ immediately passed the full 25 basis points through to floating and flexible home-loan rates, taking floating from 6.04% to 6.29% and flexible from 6.15% to 6.40%. Existing floating customers face the change from 23 September; new floating loans from 9 September.

On a $700,000 remaining balance, a 25 basis-point rise costs about $1,750 a year, or roughly $67 a fortnight, before tax and insurance. Peak-era high-LVR borrowers can face more. Canstar’s mid-2026 low-equity schedules show ASB loadings of 0.30%–1.50% a year above 80% LVR, BNZ 0.35%–1.50%, and Westpac 0.25%–1.75%. ANZ, Kiwibank and TSB often push low-deposit borrowers onto higher standard carded rates rather than a separate low-equity premium — roughly 60–90 basis points in Canstar’s reading.

On a $600,000–$800,000 balance, a 0.30%–0.75% low-equity loading is about $35–$115 extra a week. That stacks on top of OCR-driven floating and short-fixed repricing. Equity is reassessed at refix. Borrowers who still lack a 20% buffer keep paying the premium until valuations recover or principal amortises enough to breach 80% LVR.

Resale data show why many stay put. Cotality’s Q2 2026 Pain & Gain report found 13.1% of national resales at a loss — the highest share since 2012 — rising to 20.9% in Auckland and 18.4% in Wellington, with a median loss of $60,000. Apartments were especially weak, with 45.4% of resales loss-making. REINZ July 2026 data showed a national median sale price of $760,000, sales down 10% year on year, inventory up, and days to sell at 50.

First-home buyers still took a record about 29% of Cotality’s July sales even as total volumes fell. Lower entry prices and eased LVR speed limits are admitting new buyers. The locked-in 2021–22 cohort cannot easily recycle into the mover market.

From a prudential angle the stock problem is legacy peak buyers, not a fresh wave of 95% LVR originations. RBNZ raised the owner-occupier speed limit from 1 December 2025 so up to 25% of new owner-occupier lending can sit above 80% LVR. Actual high-LVR new lending has stayed well below the cap. The May 2026 FSR noted less than 15% of new owner-occupier lending above 80% LVR.

University of Otago economist Murat Üngör has described the roughly 3,600 households as painful and trapping at the individual level — job mobility, business collateral — but too small to drag national investment or GDP. Kiwibank chief economist Jarrod Kerr has stressed the mental load of rising rates on top of cost-of-living pressure. NZ Financial Services Group CEO Bruce Patten has said negative equity is primarily a problem when people need or want to move, and has advised sitting tight while servicing holds.

ANZ’s late-August Property Focus already flagged ownership costs absorbing more of the benefits of owning than historically normal, with a cautious 2026 price track of about −1% for the year. For ANZ, ASB, BNZ, Westpac and Kiwibank the near-term money trail is refinance friction and low-equity pricing, not immediate credit losses. Watch RBNZ C30 high-LVR shares, S50 housing NPLs, and Centrix arrears as floating and short-fixed books reprice higher. The risk is not mass foreclosure. It is a thin Auckland and Wellington cohort still locked in place, still paying residual low-equity loadings, and facing rising refix rates as the OCR cycle turns up again.