Warning! Mortgages are overwhelming middle-aged households—is KiwiSaver becoming a lifeline? A full picture of New Zealanders’ financial distress

A recent credit indicator report from Centrix paints a contradictory economic picture: on the surface, overdue bill rates among New Zealand households and businesses are stabilising, with the proportion of credit-active people in arrears even slightly below last year’s level. At the same time, however, financial hardship cases are steadily rising, business liquidations have reached a new high, and tens of thousands of middle-aged people and their families face lives weighed down by mortgage debt.

 

As more New Zealanders are forced to tap into KiwiSaver—money intended for retirement—to cover urgent rent payments or catch up on their mortgages, we must acknowledge that this is more than a cyclical downturn. It is a structural problem.

 

1 Mortgage pressure is rising—is stability just an illusion?

 

Centrix data shows that 485,000 people had overdue bills in May 2025, including more than 180,000 who were over 30 days behind and 81,000 who were over 90 days behind. More concerning are financial hardship cases—people formally recognised through KiwiSaver or other channels as being in financial distress—which have surged 14% over the past year, with the latest total approaching 50,000 people.

 

Credit reporting agency Centrix released its June credit indicator report:

The number of people in financial hardship continues to rise

 

Of these hardship cases, 46% relate to mortgages, a surge of 19% compared with the same time last year. Other cases include credit card debt (28%) and personal loans (18%). Centrix notes that households in the 35 to 49 age group have been hardest hit—a core group among mortgage borrowers.

Although banks have recently lowered some fixed rates, these families are focused less on a hopeful future than on how to get through today.

 

2 KiwiSaver becomes a mortgage lifeline:

 

Retirement hopes give way to immediate pressures

A starker warning comes from the KiwiSaver system. According to Inland Revenue data, financial hardship withdrawals have outnumbered first-home withdrawals in almost every month since 2024. In March 2025, 9170 people withdrew a total of NZ$225,000,000, including nearly 5000 people who withdrew NZ$44,000,000 because of financial hardship.

Comparison of trends in the number of KiwiSaver withdrawals for the two main early-withdrawal purposes, 2019 to 2025 (Source: Inland Revenue)

It is important to understand that making a financial hardship withdrawal from KiwiSaver is not easy: applicants must demonstrate that their income cannot cover basic living costs, mortgage payments, medical expenses or other serious needs. Yet this last resort is becoming a necessity every 13 weeks for a growing number of families.

DebtFix founder Christine Liggins notes: ‘We are seeing even people receiving benefits needing to draw on KiwiSaver because their benefits no longer cover basic living costs.’ This means housing pressures are no longer simply about being unable to afford a home, but about being unable to keep one or make ends meet.

 

3 The housing market is increasingly disconnected from middle-class households

KiwiSaver was originally designed to encourage young people to save for their first home. Yet this group is increasingly unable to afford house prices, even after interest rate cuts and modest price declines.

ANZ data shows that in the first six months of 2025, both the number and value of financial hardship withdrawals by its KiwiSaver members rose 18% year on year. Meanwhile, Centrix data shows that over the past year, neither the value nor the number of first-home withdrawals has reached new highs, with growth instead stagnating. Put simply, New Zealanders’ sense of financial security is shifting from saving for a home to simply getting by.

Former banker David Verry says: ‘Most applicants we help are not unemployed. They are ordinary working households whose income falls short of their expenses.’ He says many applicants have entered a cycle of applying every 13 weeks, with KiwiSaver becoming a way to keep going until the next round of bills.

 

4 Businesses are struggling together—will construction be the first to collapse?

 

The picture for businesses is equally grim. More than 750 construction companies have gone into liquidation over the past 12 months. Centrix reports that company liquidations have risen 27% annually, with construction, property development, hospitality and freight transport regularly appearing on the casualty list.

Notably, business demand for credit continues to grow despite rising risks. Credit demand in retail, hospitality, and finance and insurance has risen 25%, 23% and 18% respectively. To some extent, this reflects the dangerous reality of businesses taking on new debt to sustain existing debt.

Adding to the complexity, Inland Revenue has stepped up debt collection and enforcement. This could be the final straw for many businesses’ cash flow.

 

5 Systemic pressures across society come to the surface

 

The housing predicament is no longer simply a question of house prices. It reflects a broader systemic imbalance. A health system unable to provide timely surgery, a transport system that forces low-income people to buy cars, and a welfare system unable to maintain minimum living standards all create pressures that ultimately fall on families trying to buy or keep their homes.

Behind early KiwiSaver withdrawals lies a challenge to the capacity of the wider social system to provide support:

When a country’s middle class must draw down retirement savings simply to sustain life today, alarm bells should be ringing across the system.

 

Conclusion: stable on the surface, fragile underneath

 

For now, credit defaults have not become widespread, but that does not mean the risks have disappeared. Rising numbers of early KiwiSaver withdrawals and widespread construction liquidations are the real warning signs. Faced with this slowly deteriorating situation, policymakers need more than reassuring statements. They need systemic restructuring, including:

 

• Reassessing mortgage pressure on middle-class households;

• Strengthening public support systems;

• Reducing the likelihood of KiwiSaver being misused as a cash machine for everyday living.

 

For ordinary people, the current period feels more like a wake-up call than a recovery. Unless the structural mismatch between income and expenditure is addressed, no amount of rate cutting by the Reserve Bank of New Zealand can rescue financially depleted middle-class households.