Of the whopping $13 billion of mortgages (including refinancing) all banks in New Zealand issued in December, 22% was fixed for a year, 22% for two years and 11% for three years. Only 22% was put on a floating rate.
This stood in stark contrast to the prior month, when 49% of new mortgage lending was put on a floating rate, 22% was fixed for a year, 10% for two years and 3% for three years.
For much of 2025, borrowers had opted for floating or shorter-term rates in the hope of locking in rates for longer durations once they bottomed out in this cycle.
Many might have missed the trough, given how quickly and unexpectedly rates started rising in December.
Shortt noted that fixing for a year or two was still relatively short in the scheme of things. Given how sharply interest rates had fallen, risen and then fallen again since the pandemic, she said it was perhaps understandable borrowers weren’t confident locking in rates for longer durations.
ASB fattened the margins on its mortgage book in the six months to December 2025, according to its just-released half-year financial results.
At 2.35%, its net interest margin was six basis points above what it was during the same period in 2024.
However, all up, ASB’s profit was flat in the half year, up 1% to $719 million.
Its operating costs rose by 21% compared with the same period in 2024 as the bank increased its staffing numbers by 10%, to 6897 people.
New staff were primarily hired to support its investment in technology and to deal with cyber crime, fraud and scam prevention.
Class action weighs on ASB’s profitability
However, the factor that weighed most heavily on the bank’s profitability was its decision to enter into a $136m settlement with those who brought a class action against it.
The class action related to disclosure documents ASB was required to provide to customers who had requested changes to their lending arrangements between 2015 and 2019.
Shortt said ASB would contact affected customers to ensure they received their slice of the settlement. Tens of thousands of customers will likely need to be paid.
Shortt couldn’t put a timeframe on how long it would take for customers to be paid.
While ASB agreed to settle with the claimants, who were automatically included in the class action without having to opt in, it made no admission of liability.
ANZ is still fighting its corner in the class action.
The Government is changing the Credit Contracts and Consumer Finance Act to ensure the penalties banks receive for breaches of the law are more proportionate than was the case when the class action was brought against ASB and ANZ. The old, more heavy-handed law will still apply to ANZ.
ASB customers unlikely to benefit from bank capital rule change
Taking a step back and looking at the economy more broadly, Shortt saw a gradual but uneven recovery.
The value of ASB’s mortgage lending was up 8% in the final six months of 2025 compared with the same period in 2024. Business and rural lending were also up 4%.
The value of bad debts was also down, as debt servicing costs fell during the year.
However, Shortt said inflation was still “the watch-out” as it remained sticky.
She was also worried about risks outside New Zealand’s control, including the geopolitical environment.
She said one had to expect constant change and be prepared to adapt.
She didn’t believe ASB customers would see a difference in the cost and availability of credit on the back on the Reserve Bank changing its bank capital requirements.
Shortt recognised the changes would benefit small banks, helping them compete with the larger ones.
However, she didn’t believe they would make a big difference for ASB.
Jenée Tibshraeny is the Herald‘s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
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