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Weekly mortgage approvals at non-holiday period lows

Weekly mortgage approvals at non-holiday period lows

Figures from the Reserve Bank show the number of home loans approved over the past two weeks have sunk to lows not seen outside holiday weeks since the central bank started compiling weekly data in 2003.

Just 5,241 home loans were approved in the week ending July 2, down from 5,384 the previous week. Both weeks recorded only about half the level of loans approved in some weeks during the boom times in 2006 and 2007. Last week’s figure is down from 7,078 in the week ended July 3, 2009 and is a 21.5% drop based on a comparison of the most recent 13 weeks of data compared to the same 13 weeks last year.

At NZ$679.9 million, the value of home loans approved last week was 25% less than the NZ$911 million approved in the week ended July 3, 2009.

And the NZ$677.7 million worth approved in the week ending June 25 is the lowest value of approvals for a week that doesn’t include a public holiday or fall during the Christmas-summer period since September 2008, when the Global Financial Crisis was taking a grip.

Shaun Riley chief executive of Mike Pero Mortgages the country's largest mortgage broker, told his firm's business was down about 15% year-on-year.

"It was a quiet start to the year and we thought that there might have been a few people waiting to see what happened in the Budget," Riley said. "And then the Budget happened and we expected a bit of pick up that didn't eventuate."

He expected approvals to remain slow over the rest of winter but said he had an "inkling" some pent up demand might emerge with spring.

'The Budget was perhaps not as bad for (property) investors as they thought it was going to be. (And) even though interest rates are creeping up, people earning over $60,000 are going to get a bit of a pay rise in October," Riley said.

He also noted that lenders were becoming more flexible. Although many had been reluctant to lend more than 80% of a purchase price over the past couple of years, the "appetite" was starting to return for loans of 85% and even 90%.

"And for a customer that can be underwritten by a mortgage insurer up to 95%," Riley said.

"(So) when demand does come back, it's slightly easier to get approval than it was this time last year."

 The latest Reserve Bank weekly figures follow the release on Monday by Barfoot and Thompson, Auckland's largest real estate agency, which showed June house sales volumes at 665 down 23% from 861 in June a year ago and down 16% from May. At NZ$523,058 the average price was down 3.6% from May and up 0.25% from June a year ago. See full story here.

ASB economist Jane Turner predicts housing market activity will remain very weak throughout the remainder of 2010, reflecting waning demand. Turner says tax changes in May's Budget around depreciation rules have reduced the attractiveness of holding investment property at the margin. On top of this, slowing net migration and rising interest rates will reduce support for housing demand with house prices falling slightly this year.

And Westpac economists say the Budget changes have reduced the fundamental value of property with house prices likely to fall by about 2% this year and next year.

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Ultimately both booms and bubbles come to an end.