The landscape of homeownership in New Zealand is challenging at the best of times, but for those in their 40s, this decade often represents an important period for re-evaluating your financial situation. 

With retirement looming on the horizon, children well into their teenage years or heading off to university, and the ongoing cost of living pressures, some budget adjustments are needed! In this post we will talk about some of the broader economic factors that New Zealand homeowners are currently facing while exploring practical steps to make the most of your finances, from mortgage management and KiwiSaver adjustments to tackling rising living costs and planning for long-term security.

The 40s Priority Shift 

When you hit your 40s, your priorities shift. You’ve likely entered a time when your basic needs are met and your finances are more stable. So, the financial focus sometimes shifts to other areas in life such as your health, building more meaningful life experiences, changes in family demands, and the desire to increase investment capital.

You might find yourself having to go to the doctor’s or dentist a bit more often, feel the need to hit the gym to increase your fitness, or have an increased focus on your mental wellbeing with more meaningful life experiences in the pipeline. You may even be reassessing life goals and values and adjusting to the changing financial needs of adult children (uni expenses, helping out with flatting) or assisting with care costs for aging parents.

This reassessment of your financial priorities also comes with the underlying and ongoing need for saving for retirement, paying off debt faster and building emergency funds. So it’s a busy time to say the least! How can you address these new priorities and budget for the future? Let’s dive into what every homeowner should know and the budget changes those in their 40s should make in 2025!

What Homeowners In Their 40s Need To Know

Before we get into the details, we do need to understand the broader economic context that we are currently working with here in New Zealand and the impact of recent New Zealand Budget announcements for 2025 – so bear with us here while we talk fast-facts and numbers.

1. Cost Of Living Pressures

The cost of living continues to be a big concern for many Kiwi households. According to Stats NZ, the rate of increase in household living costs rose by 3.0% in the 12 months leading up to December 2024. While this has dipped slightly from its heights in previous years (8.2% in 2022), for homeowners, particularly those with a mortgage, rising interest payments have been a major contributor to increased living costs. This, in conjunction with increases across the board in insurance, property rates and rent pressure, means every dollar needs to be managed wisely.

2. Mortgage Interest Rates And The OCR

Interest rates have been a hot topic of late, with the country experiencing something of a slight correction period over the past 2-3 years following the aftereffects of the pandemic. While some major banks have recently cut certain fixed rates, those in the know suggest we are nearing the lowest point for the Official Cash Rate (OCR) for now. This means that while some further minor adjustments might occur, the significant drops in interest rates seen across the pandemic period are likely to be well behind us.

3. Housing Market Forecasts

The New Zealand housing market is predicted to see some rises in sales prices for the 2025 year, with major banks forecasting modest increases of between 4.5 and 7%. While this is a positive for property values, it does reinforce the ongoing challenge of affordability for those looking to upgrade or expand their property investments. For existing homeowners, increases in equity are always appreciated, but this doesn’t really help with the increasing pressures of mortgage repayments and living expenses!

The 2025 Budget And Its Impact On Homeowners

The recent official Budget of 2025 has introduced several changes that specifically affect homeowners. Understanding these changes will help with adjusting your financial strategy going forward.

• Accommodation Supplement Adjustments. Changes to the Accommodation Supplement are important for some homeowners. In a nutshell, the Budget this time round is basically increasing the minimum amount some homeowners must pay towards their weekly housing costs (the entry threshold). This means some homeowners receiving this supplement will have to put in more of their income before receiving support, and some with lower housing costs might not be eligible anymore. 
• KiwiSaver Changes. The KiwiSaver program for retirement and first-home savings is undergoing some even bigger changes in the coming years. These include increased default contributions (from 3% to 3.5% from April 1, 2026, and then to 4% from April 1, 2028). Reduced government contributions (from July 1, 2025) are also being brought in where the government contribution rate will halve from 50 cents for each dollar to 25 cents. Eligibility limits are also changing for the annual government contribution; if your income exceeds $180,000 per year, you will no longer receive the government top-up.
• Bright-Line Test Refinements. The Bright-Line Test, which taxes gains from the sale of residential property, has been a significant point of discussion over recent years and has experienced some significant changes in this time. However, effective as of July 1, 2024, the bright-line test now only applies if the resale date is within two years of the original purchase date. This is a considerable reduction from the previous 10-year period (for properties acquired after March 27, 2021). This has significant implications for homeowners considering property investment as part of their wealth-building strategy.

Actionable Budget Changes For Homeowners In Their 40s

Now, let’s translate these economic realities into actionable steps for building wealth and improving your household budget.

1. Mastering The Mortgage

For most homeowners, the mortgage is the single largest outgoing expense every month, which makes it the top priority in your 40s (with potentially fewer years until retirement). What are some of the things you can do to re-evaluate your biggest expense?

• Review Your Mortgage Structure. With interest rates having seen some recent cuts and potentially entering a more stabilised period, now is the time to review your mortgage structure. Are you on fixed or floating, is your loan split appropriately? Could re-fixing part or all of your loan provide more certainty and potentially lower your repayments? Exploring your options with your bank, a mortgage advisor or a financial coach may save you thousands in interest repayments over the longer term.
• Accelerate Principal Payments (Where Possible). Even small additional payments to your mortgage principal can significantly reduce the total interest paid and shorten your loan term. As you enter your 40s, now is the time to reflect on whether you could increase your regular payments, make lump-sum payments or even just round up your repayments. The sooner you reduce your principal, the more you will save in the long run. 
• Consider Shorter Loan Terms (Carefully). If your financial situation allows, you could explore shortening your mortgage term. While this means higher regular repayments now, it leads to substantial interest savings over the lifespan of the loan which aligns with the goal of being mortgage-free or significantly debt-reduced by retirement.
• Refinancing to a Lower Rate. Regularly shopping around for the best mortgage rates is worth the effort, even a small difference in interest can add up to thousands over time. Don’t be afraid to leverage offers from other banks to negotiate with your current lender, and explore break fees if necessary.

2. Supercharging Your KiwiSaver

The latest KiwiSaver changes make it a good idea to take a fresh look at your KiwiSaver situation and contribution strategy. Some things to think about are:

• Maximising The Government Contribution. Because the government contribution has halved, ensuring you contribute at least $1,042.86 annually to receive the full $260.72 is your first step, as this is essentially free money. Set up an automatic payment if you haven’t already.
• Increasing Your Contribution Rate. With the default employer and employee rates set to increase, consider pre-empting these changes if your budget allows. Moving from 3% to 4%, 6%, 8%, or even 10% can make a substantial difference to your retirement nest egg. 
• Review Your Fund Type. Ensure your KiwiSaver fund aligns with your risk tolerance and time horizon. In your 40s, you likely still have 20+ years until retirement, so a growth or balanced fund might be appropriate, as it allows for greater potential returns over the long term, even with market fluctuations. Consult with a financial advisor if you’re unsure if this is right for you.

3. Getting Proactive With Household Expenses

With the continued pressure of rising living costs, a regular review of household expenses is a no-brainer. Start with utilising budgeting apps, spreadsheets, or even pen and paper to track where your money is being spent and use this to identify areas for savings.

• Review Insurance Costs. Insurance premiums and property rates have seen significant increases over the last couple of years. It is always a good idea to periodically shop around for home, contents, and car insurance. Avoid just renewing automatically, and look into bundling policies and the associated discounts. You could even consider increasing your excess if you rarely make claims or have a robust emergency fund.
• Increase Energy Efficiency. Power bills are a significant household expense, so any way of reducing these is going to help. Investing in energy-efficient appliances, sealing drafts, insulating, and managing heating more effectively are good places to start, and you could explore government grants or incentives too.
• Be Thrifty With Food And Groceries. Probably a big one for most households, the weekly trip to the supermarket is often a bit of a shock to the system when you see the total at the checkout. Meal planning, cooking at home, buying seasonal produce, and utilising loyalty programmes are all great strategies for making savings.
• Review Your Subscriptions. Do you use all your streaming services, gym memberships, and online subscriptions to their full potential? Or are you just wasting money on things you don’t need? Cancel anything you don’t regularly use!

4. Protecting Your Financial Buffer

Your 40s can bring numerous unexpected expenses, with everything from car and home repairs to children’s needs or unforeseen health issues piling on. Building up your emergency fund (aim for 3-6 months of essential living expenses saved up) is crucial for navigating life’s financial shocks without resorting to high-interest debt. 

Reviewing health, life and income protection insurances is also a good idea with growing families, career shifts, and new health considerations to take into account. On this note, it is also a good idea to ensure your Will and power of attorney are all up to date. This protects your assets and ensures your wishes are met, preventing future financial complications for your loved ones.

5. Exploring Additional Income Streams Or Investments

Beyond cutting costs, your 40s might bring the desire to consider opportunities to increase your household income and grow your wealth. What this could look like is a side hustle, freelancing, consulting or even renting out a spare room. These are all excellent ways to provide an extra cash injection for debt reduction or savings.

Diversifying investments is another popular tactic – now might be the time to explore diversified investment opportunities beyond property, such as managed funds, exchange-traded funds (ETFs), or shares. This approach can help grow your wealth while providing a passive income stream in the future. Always consider your risk tolerance and seek professional advice before investing.

6. Retirement Planning 

For homeowners in their 40s, retirement planning moves from a distant concept to more of a priority. Defining your retirement vision is a good place to start. What does retirement look like for you? Will you be mortgage-free? Do you plan to travel, pursue hobbies, or downsize? Having a clear vision will help you quantify your retirement savings goals and calculate your retirement shortfall. Working with a financial coach or retirement advisor will help identify any gaps and set you on the right path.

For New Zealand homeowners, navigating the current economic climate and adapting to budget changes requires a proactive and informed approach. By meticulously managing your finances, you can avoid the stresses of budget shortfalls and set yourself up for retirement. Consider consulting with a financial coaching specialist who can provide personalised guidance tailored to your unique circumstances and help you build a robust financial plan for the years ahead.