The country's total mortgage lending stock has topped the $350 billion mark for the first time after growing last month by numerically the biggest amount so far this year.
The latest monthly sector lending figures from the Reserve Bank (RBNZ), show that total outstanding mortgages (including both for banks and non-bank lenders) rose by $1.177 billion in June. That's the most since November last year.
The increase in the latest month took New Zealand's mortgage pile to $350.042 billion.
While this latest month's figure would provide some evidence that the trough in terms of market activity has now been passed, the first six months of the year have been very slow.
During the six month period the total mortgage stock outstanding rose by $4.492 billion - which is the smallest numerical rise for the first half of a year since 2012, when the increase during the same period was just $2.66 billion.
The larger rise in the mortgage stock over June saw the annual growth rate for the stock actually stop declining for the first time in about two years (at which point the annual rise was running at 12%). It has now levelled off at 3.1%, which is nevertheless still the slowest rate of growth annually since late 2012.
Looking back again at the first six months of this year and comparing it with the first six months of previous years, the $4.492 billion growth in the mortgage pile compares with $8.504 billion in the first half of 2022 - so a lot lower.
But the comparison with 2021 is just crazy. The first half of 2021 saw the mortgage pile grow by exactly $18 billion, so averaging exactly $3 billion a month as the pandemic housing frenzy remained at full speed. That $18 billion is very much a record in a data series that now stretches 25 years, with the next highest figure being $10.045 billion recorded in the first half of 2007, shortly before the Global Financial Crisis.
The lowest growth in the housing stock witnessed in the past 25 years has been $1.907 billion in 2001 - but it's well worth pointing out that the total mortgage pile was just $67.5 billion then - so the pile's over five times bigger now.
In other highlights in the sector lending figures pointed out by RBNZ for June, business lending stock increased by $497 million (0.4%) in June 2023, but annual growth dipped for the seventh consecutive month, down to 3.0%.
Agriculture lending stock increased sharply by $564 million (0.9%), the largest monthly increase since June 2018. The annual growth rate rose further from 1.6% to 1.9%.
31 Comments
Outsource economic stimulus to the private sector, lower the cost of debt and use existing houses as a proxy.
It's better than having it show up in red on a Government's balance sheet, even if that capital was directed at building new hospitals, investing in rail etc.
Yeah I'm wondering if slapping a constraint to the banks to have a minimum of business lending on their balance sheets would be a silver bullet to a lot of our problems (mainly lower productivity, unsustainable house prices)
It's not unheard of, it was floated around for FLP (to be used only for business purposes) but Grant Robertson was oblivious to that
The issue is that the balance sheets are so skewed right now (80% mortgage / 20% business lending) that if you want to get to a healthier overall ratio (say 40% mortgage 60% business) you'd have to have crazy low new mortgage lending for a decade to get there
It's not unheard of, it was floated around for FLP (to be used only for business purposes) but Grant Robertson was oblivious to that
He's a clown.
The issue is that the balance sheets are so skewed right now (80% mortgage / 20% business lending) that if you want to get to a healthier overall ratio (say 40% mortgage 60% business) you'd have to have crazy low new mortgage lending for a decade to get there
It's too late for that. The bubble is too big to fail. And is the proxy collateral for much business lending anyway.
Can be done gradually. Start by at least not making it worse, then gradually go a 5% per year or whatever's marginally feasible
Point is it needs to be a long term bipartisan strategy. But it would be a clear message to the banks they need to shift from easy money to ensuring the economy's pumping sustainably
This assumes there are profitable businesses to lend to, if at the same time, the bank is reducing/limiting its line of credit to the housing market, which has been the foundation of economic growth in the country.
If you take this away, it might be impossible to find credit worthy businesses to lend to! I.e. if the economy is contracting because debt extending to the housing market isn't growing as strongly, the whole stack of cards might tumble.
In my mind this is exactly what this kind of measure would address
Take the lazy "let's lend to the housing market and then ma' wealth effect" mentality out of the equation. You're left needing to have competitive businesses to lend to. So (1) you'll have to become much better at assessing business viability. (2) If you want to lend more money (to have more interest coming back) you'd have to have more businesses to lend to (to your point). So you may want to develop programmes for that, entrepreneurship and management and stuff
Banks are specialised now in the housing market. Take the same effort, put it into business. Coordinate with government programmes. Point is, it's a statement from all government and banks and businesses that whatever expertise exists now for selling houses to each other can and should be redirected to doing business. Have 30 mortgage broker businesses in whatever region? They'd become business lending brokers, as an example
My point: a clear signal diverting out from playing real life Monopoly to playing entrepreneur. If gradual, it might work to shift. I'm not saying it's smooth riding, I'm saying it's a cancer treatment that needs to happen sooner or later
That's capitalism for you. Unless banks are being forced, they will always go after the easy money.
A due diligence check on a couple buying a house is a lot less time consuming and expensive than similar checks on a business, even though the interest rate on the business loan would be higher, sometimes considerably so, than the home loan.
They also look at how easy is it to liquidate any assets if the loan repayments cease. Selling a house at a mortgagee sale would be far easier and quicker than bankruptcy proceedings for a business.
Banks are under no obligation to support social morals, but they do have to generate profits for their shareholders.
But certainly seems like NZ banks are just for housing loans. They all got rid of their insurance businesses. And I suspect that 80/20 split will be moving towards 90/10 then 100/0. Businesses in NZ will have to borrow from overseas if they want to grow, meaning even more profits going offshore.
Am I correct in saying that the $350bn is all going to 7%’ish ? That’s the household debt number right? That’s a lot of money to suck out of the economy. I get there is counter payment to this but by definition that is largely being saved/accumulated.
The change last month suggest that it’s not equity buyers taking a punt. It’s still people gearing up albeit probably a hangover from the last few months.
Gee hate to quote myself but....
by Zwifter | 30th Jul 23, 5:01pm
Simple question, how many months of prices not going down does it take for you to admit its the bottom ? or are you the sort of person who still doesn't admit its the bottom even when prices start to rise again cos its just a "Dead cat bounce" or something like that ?
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