The $14 Billion “Churn”: Why Kiwis are Switching Banks in Record Numbers

By Lions Roar Aotearoa Economic Desk

AUCKLAND, NEW ZEALAND (Monday, February 2, 2026) — New Zealand’s mortgage market has been hit by a massive wave of “bank hopping,” as borrowers chase aggressive cashback offers in a record-breaking month of lending activity.

According to fresh Reserve Bank data, home loan lending hit $14.1 billion in December—a staggering $3.6 billion higher than the previous record set during the 2021 housing boom. However, experts say this isn’t a sign of a new housing bubble, but rather a giant game of “pass the parcel” between major banks.

📉 The Cashback War by the Numbers

Cotality Chief Property Economist Kelvin Davidson describes the surge as “huge gross churn.” While some lending was for new house purchases, the vast majority came from people refinancing and switching lenders to snag upfront cash.

Metric	December 2025 Data	Previous Record/Average
Total Lending	$14.1 Billion	$10.5 Billion (March 2021)
Refinanced/Switched	$5.8 Billion	Double the previous high
Switching Share	41% of all lending	30% (June 2025)

The driver? Incredibly aggressive 1.5% cashback offers seen in late 2025. For a $1 million mortgage, that equates to a $15,000 cash injection—a tempting figure for households facing high living costs.

⚖️ The Hidden Cost: Who Really Wins?

While $15,000 upfront sounds like a victory for the borrower, mortgage experts warn there is no such thing as “free money” in banking.

The “Loyalty Tax”

Squirrel CEO David Cunningham suggests that these massive cashbacks might actually be keeping interest rates higher for everyone else.

“I’d argue we would have seen one-year fixed rates down at 4% by now, but cashbacks have become the new battleground. Banks aren’t competing on interest rates as much because they are funding these cash incentives instead.”

The Winners vs. The Locked-In:

The Winners: High-income borrowers with large loans and low Debt-to-Income (DTI) ratios. These “low-risk” customers are the primary targets for cashback offers.
The “Price Payers”: Existing customers who cannot move due to break fees or high LVR (Loan-to-Value) ratios. They often miss out on the best rates and the cash incentives, effectively subsidizing the “switchers.”

🔍 Expert Take: Is it Worth the Switch?

Banking expert Claire Matthews from Massey University offers a more balanced view, noting that while cashbacks are a standard marketing tool, interest rates still remain the primary driver for most long-term borrowers.

“If you don’t qualify for a cashback, you can still negotiate with your current bank for a better interest rate,” she suggests. However, borrowers must watch out for clawback periods—usually 3 to 4 years—where the bank can demand the cash back if you move again too soon.