Home loan approvals at non-holiday low for 4th consecutive week

Weekly housing loan approvals sank to another fresh non-holiday week low last week, according to Reserve Bank data.

The Reserve Bank figures show just 4,818 mortgages were approved in the week ended July 16. That’s down from 4,867 the previous week and is a new low for a week outside a holiday period or that doesn’t include a holiday in it, since the central bank’s records began in 2003.

The figures now record four consecutive weeks of non-holiday lows. They come with annual bank credit growth to households down to around 2.5% from almost 10% two years ago, follow property tax changes introduced in May's Budget, and come after the Reserve Bank hiked the Official Cash Rate by 25 basis points on June 10 to 2.75%, the first OCR increase since July 2007, almost three years ago. A further 25 basis point hike is expected on July 29.

The number of mortgage approvals in the 13 weeks to July 16 was down 22.3% from the same period last year.

The value of the approvals rose, however, to NZ$624 million from NZ$601 million in the week ending July 9. Nonetheless, the value in the last 13 weeks was down 20.1% versus the same period a year ago.

The 4,818 mortgages approved in the week ended July 16 compare to 6,597 approved in the week to July 17, 2009 and 7,840 in the week ended July 20, 2007. The NZ$624 million value is well down on NZ$815.1 million for the equivalemnt week last year and NZ$984.1 million in the week ended July 20, 2007.

The Reserve Bank defines an approval as a firm commitment to provide credit for the purchase of housing, which has been accepted by the borrower. It says a commitment exists once the home loan application is approved, and a loan contract or letter of offer has been issued to the borrower.

Included in the figures is the refinancing by one bank of other banks customers, any loan where the security changes, and any loan where the liability holder changes. 

Excluded is own customer refinance, - the ‘rolling over’ of a fixed rate loan, and its subsequent refinancing, business borrowing where the security is the owner’s home, and the underlying value of a loan being “topped up.”

Seven banks respond to the survey representing more than 99% of registered bank lending for housing, and about 94% of total housing lending. The series, which the Reserve Bank describes as an experimental one, began with data for the week ended October 31, 2003.