July 31, 2021

MP Now News

Mortgage News

New Zealand’s first $10 billion mortgage month

Mortgage borrowing rose again in March, topping the $ 10 billion mark for the first time. This is shown by new credit data from the Reserve Bank.

The $ 10.4 billion loaned month was the highest amount since the Reserve Bank began collecting data in August 2014, and the last in a series of record numbers set in the last few months of last year.

Of that borrowing, $ 2.3 billion went to investors and $ 1.7 billion to first-time buyers. Existing owner-occupiers were $ 6.2 billion.

While the $ 2.3 billion borrowed by investors was high, it was below the $ 2.45 billion they borrowed last December and also below their record of $ 2.48 billion set in the May 2016 was recorded.

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But the $ 1.7 billion that went to first-time buyers was a record high, surpassing their previous record of $ 1.68 billion set in December last year.

A comparison of the March data with the data for the same period last year has highlighted the runaway dynamics of the real estate market over the past nine months.

In March last year, mortgage loans totaling $ 6.1 billion were granted. Although the fourth tier lockdown hit the last week of the month, it was above the $ 5.7 billion borrowed in March 2019.

Of that $ 6.1 billion, investors accounted for $ 1.3 billion and first-time buyers accounted for $ 1.1 billion.

That meant investors borrowed 76 percent more this March than last March, while first-time buyers borrowed 56 percent more.

Reserve Bank data shows that mortgage lending hit a record high in March.


Reserve Bank data shows that mortgage lending hit a record high in March.

The tremendous growth in mortgage borrowing was due to homebuyers pouring into the market, attracted by record lows and the Reserve Bank’s temporary suspension of the loan-to-value ratio (LVR) caused by Covid.

However, growth in mortgage lending could have peaked with record numbers in March.

CoreLogic’s senior real estate economist Kelvin Davidson said while it was another peak month for mortgage lending, the stricter LVRs reintroduced March 1 had already severely constrained low-deposit investor flows.

“This is fully to be expected, as the banks themselves have made progress well before the official date for stricter LVRs and have actually gone further and have already made a deposit of 40 percent necessary [for investors]which the reserve bank will commission from May 1st. “

CoreLogic's Kelvin Davidson said the reinstated LVRs have already restricted investor flows on low deposits.


CoreLogic’s Kelvin Davidson said the reinstated LVRs have already restricted investor flows on low deposits.

Davidson said the government has now also taken substantial additional measures to curb the activity of investors with higher debt and that the effects of these policy changes would gradually wear off in the coming months.

“We don’t expect the interest deductibility and positive changes to lead to a sell-off by current landlords, but further purchases are likely to be restricted (especially on existing properties by leveraged investors).”

Further measures to slow the market, like caps on interest-free investor loans, couldn’t be ruled out in the next few months, but the odds seemed to have diminished, he said.

Before the real estate boom after the lockdown, the highest mortgage loan amount in a month was $ 7.3 billion in May 2016.

This was the high point of the last market cycle and just before the Reserve Bank introduced a 40 percent credit-to-value ratio for investors, which resulted in a noticeable easing of mortgage lending to investors.