Housing loan market

The Reserve Bank publishes the total volume of housing credit issued by almost all financial insitutions every month, about 4 weeks after month end.

This data enables us to derive the growth in housing credit, and adjust for 'series breaks' as necessary, so that the growth data is corrected.

The total amounts loaned for housing is dominated by bank lending, and this one category of lending is almost as much as the country's annual GDP.

Lending for housing far exceeds any other lending, and is more than lending for agriculture, and lending to all other businesses, combined.   

This is how much housing debt we have right now ...

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3 Comments

David, any chance we could have a third tab showing household debt to GDP? It would make this most excellent chart even better.

At the time I write this, the "how much housing debt we have right now" figure is 199,709,669,575.
At the current rate of increase this translates to and increase of $94 per minute or $49,406,400 over 365 days.

I look at the above chart and it shows a total debt of $203,452,000,000 as at 30 June 2015.

Therefore, either the above chart is incorrect or the above "current debt we owe right now" is wrong.

I recall looking at this figure 12 months ago and it was going up far far quicker.

Ongoing mortgage rate cuts are likely to see this "debt" grow quicker. Looking at the chart, the growth from 31 May 2015 to 30 June 2015 was $1,115,000,000 in just one month. This was before the interest rate cuts announced by the Reserve bank.

Therefore, do we assume the above figure "current debt we owe right now" is correct since in just the month of May, the debt grew at more than 22 times the rate (refer to chart) at which the above "current debt we owe right now" figure will grow in a full year?

I think Interest.co.nz staff need to revisit this "current debt we owe right now. Because at the end of this year based on current chart grow, the chart is likely to show a debt of $210,142,000,000 meanwhile the "current debt we owe right now" figure is only likely to grow by around $22,000,000 which means $10BILLION difference in figures.

If we simply look at the growth in the chart from May 31 2015 to June 30 2015, the increase in the "current debt we owe right now" should be around $430 per second.

It is interesting that I arrive at a true increase of around $430 per second, as this was the rate the above figure was increasing at when I discovered this chart over 12months ago. certainly not $1.50 per second as it currently indicates.....is there a deliberate attempt to mislead people or is this simply an error in the "behind the scenes" calculations? Certainly something for interest.co.nz to investigate dont you all think?

And yes, to answer Roger's question above about debt to GDP as a percentage, my quick calcs for PRIVATE debt only.... come in at 152% of GDP, add GOVT debt to that and you have a figure close to 200% of GDP. If NZ suffers an economic contraction in GDP this may end up disasterous. Remember Argentina? They went bust in 2001 with debt levels of between 50-60% of GDP. Ofcourse interest rates were much much higher "apparently normal rates" back then. No-one is saying.... watch out how much you borrow now because interest rates may not be this low for very long? Instead, the banks will continue to inflate a housing market which is already in "bubble" territory. Rising inflation is the risk. Worldwide money printing is the "planted seed". The inflationary flower will evenuate sooner or later and people will wish they never borrowed at "60 year lows". Unless you can pay your house off in 3 years you may need to think about this and your potential capital loss as a result of rising interest rates in the longer term. The next 12 months will see the kiwi "splurge on housing again" and this will come home to roost.

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