The pace of household cost increases has continued to slow, providing some relief for many households after several difficult years of rising expenses.
According to the latest figures from Stats NZ, the cost of living for the average household increased 2.1% in the 12 months to the March 2026 quarter. That followed a 2.2% increase in the December 2025 quarter.
Meanwhile, the annual inflation rate remained higher at 3.1%.
Stats NZ said the difference largely reflected lower borrowing costs. “Falling interest payments for households was the main reason for the lower increase in the cost of living compared to New Zealand’s overall inflation rate.”
Why living costs and inflation differ
Although the terms are often used interchangeably, household living costs and inflation are measured differently.
The household living-costs price indexes include mortgage interest payments and credit card interest, while the Consumers Price Index – the main inflation measure – does not.
That distinction has become particularly important as interest rates have fallen over the past year. Lower mortgage repayments have reduced financial pressure for many borrowers, even while prices for groceries, insurance, rates and other everyday expenses have remained elevated.
However, not all households experience these changes in the same way. Homeowners with mortgages may benefit more directly from lower interest rates, while renters or households without debt may continue to feel broader inflation pressures more acutely.
What this means for household finances
Although cost pressures have eased considerably since the inflation peak of recent years, household budgets are still under strain in many cases.
That means maintaining good financial habits is still important, particularly in an environment where global uncertainty and fuel prices could still affect inflation and interest rates in the future.
Some practical steps you may consider include:
- Reviewing regular expenses and subscriptions.
- Checking whether your mortgage structure still suits current conditions.
- Building or rebuilding emergency savings where possible.
- Paying down high-interest debt more aggressively.
For borrowers, lower interest rates can also create an opportunity to get ahead financially by increasing repayments or shortening loan terms while repayments are more manageable.
Small changes made consistently over time can make a meaningful difference to long-term financial wellbeing.
Thinking about reviewing your mortgage to ensure your finances remain on track? Get in touch to discuss your lending structure or explore ways to improve your financial flexibility.
