Spending money on dining out, entertainment and fashion is out for mortgage holders cutting costs to make ends meet amid higher interest rates and inflation.

The latest Consumer Pulse report by research company Canstar NZ, which surveyed 7679 people on their spending habits, showed two-thirds of mortgage holders were cutting back on spending to meet higher repayments.

The company has surveyed more than 20,000 New Zealanders on their financial habits and worries since February 2021 to measure changing trends over time and compared some of the answers to its most recent survey, with data collected between October last year and January 2023, to data from early-2021 surveys.

Of the net 66 percent of mortgage holders pulling back on spending to meet higher mortgage repayments, just under half of those were reigning in non-essential spending on dining out, entertainment and clothes.

But 21 percent of those pulling back on spending were cutting back on essentials, including groceries, electricity and phone usage.

The average two-year fixed mortgage rate was sitting at 6.7 percent, up from 2.63 percent two years ago, while inflation remained near a record-high at 7.2 percent.

Canstar NZ general manager Jose George said people were feeling more confident about managing their money, close to two-thirds of respondents, or a net 62 percent, saying they were living within their means, up from 44 percent two years ago.

"It's probably an after-effect of Covid-19, and the cost of living crisis is really difficult to avoid, so you're sort of forced to be better with budgeting," George said.

"We've seen that the cost of so many basic expenses, petrol or food or mortgage repayments, they've all leapt up and as a side effect of that, you really need to become smarter with your financial management."

George said New Zealand historically had low financial literacy levels and that needed to improve.

"But the problem we've got is that its stress that is leading us to be better at budgeting, rather than the other way around."

There were still lessons to be learned however, with a net 53 percent of respondents saying they lived payday-to-payday, he said.

Nearly half of the people, a net 47 percent, didn't have enough savings to get by for two months without an income, though George said this was an improvement on 2021's data when 72 percent said they did not have the same financial buffer.

Those aged 30-40 appeared to be suffering the most, with more than a quarter of respondents in that age group planning to cut back spending to meet increasing mortgage rate repayments, but those who had not bought their first home in that age bracket were dropping out of the market altogether.

"In 2021, nearly half (48 percent) of 30-somethings considered themselves potential first home buyers," the report said.

"But now, that figure is 33 percent, suggesting nearly a third have pulled the plug on the dream of home ownership, at least for the time being."

That trend extended to those in their 40s, with the number of respondents considering buying a house dropping from 38 percent in 2021 to just over a quarter.

Meanwhile, interest in investing in the share market has pulled back over the last two years - back in 2021, more than 40 percent of New Zealanders in their 30s and 40s were investing in the share market, the most active investors of all respondents.

That figure has dropped to less than 30 percent in 2023.