Both the volume and value of mortgages approvals dropped to non-holiday week lows last week, according to Reserve Bank data.
Reserve Bank figures show 4,686 home loans were approved in the week ending September 10, the first week after the September 4 Canterbury earthquake, valued at NZ$574.3 million. Both the volume and value of approvals in the 13 weeks to September 10 is down almost 26% on the same period of last year.
About 14% of real estate sales since 2000 have been made in Canterbury. However, the latest figures continue trends of the past two to three months which have seen several new non-holiday week lows in the Reserve Bank series that began in October 2003.
At NZ$574.3 million the value of mortgages approved is only a fraction higher than the NZ$578.2 million value of the 4,438 mortgages approved in Easter week, the week to April 9, this year.
Mortgage approvals can be a useful early indicator of where the housing market might head, given it includes data that is less than 10 days old and approvals now can turn into sales in a few weeks or months time.
The mortgage approval figures do, however, have some caveats. 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.