Housing and farm loans up in August, no pre-GST hike spike in consumer debt

Housing and farm loans up in August, no pre-GST hike spike in consumer debt

Bank lending to businesses is showing some flickers of life with Reserve Bank figures recording a month-on-month rise in August and the slowest annualised fall since last November.

Reserve Bank data out today shows total lending to business stood at NZ$72.3 billion at the end of August. That’s up NZ$127 million from the NZ$72.18 billion at the end of July, but is down 6.6% from NZ$77.55 billion in August last year. That’s the smallest annualized fall since a 4.5% drop in November last year. It last rose in July 2009.

Meanwhile, lending to both the agricultural and household sectors rose.

Lending to agriculture rose 1.9% year-on-year to NZ$47.8 billion.

Total household claims were up 2.2%, year-on-year, or just 0.1% month-on-month, to NZ$181.2 billion. The growth, however came from the housing sector, up 2.4% year-on-year, or NZ$230 million month-on-month, to NZ$169.4 billion, with consumer lending down 1.4% year-on-year, or NZ$25 million month-on-month, to NZ$11.79 billion, showing no signs of a credit card led splurge before GST is hiked to 15% from 12.5% on October 1.

The recently released PricewaterhouseCoopers (PwC)  third New Zealand Banking Perspectives report noted a “dramatic” 6% decrease in business lending in the six months to March.

PwC partner Sam Shuttleworth said lending to businesses was likely to continue falling because companies themselves weren't necessarily taking on business investment activity therefore reducing borrowing demand, there was an increase in corporate bond offers, and the fact that borrowing money was costing more because the banks themselves are paying more for their funding and looking to recoup this from customers.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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12 Comments

Oh yeah, baby! Property is BACK! But you better get in now, before it's too late!

Ewe can't lose with property , MAAAAAAAAAAAAAAAAAAAAAATE !!!!!... ........ Ay , Bernard , she never goes down 30 % .

We must be due to suffer from the Kiwi bank residential get your mortgage now advertising splurge....will it be an Octoberfeast on credit... Or will Mr Market turn up and kick the sh-t out of the bubble for old times sake with a wake up you buggers who owe all the dosh rate hike!

Oh dear oh dear look at that...the Kiwi$ has hit the deck and kept falling...maybe Mr market has arrived...some sod sure said SELL

So does this fantastic property news mean that there will now be hordes of desperate buyers frantically bidding for every one of the many houses about to hit the spring market?

Yus.... arh..... yah.... yes...... yes...arhhhhh .... NO

 "An Auckland health company has been fined $16000 for labelling imported royal jelly as New Zealand-made. NZ Korea Health Limited was sentenced in Auckland District Court today after admitting nine breaches of the Fair Trading Act when a Commerce ... " herald

That must have been the flicker of life they are on about!.....$16000 fine...and they caused about $200000 damage to genuine producers...and they made how many thousands on the rort?...no wonder the shite looked like he was holding back a bloody big laugh in the courtroom!

Given that house prices have stopped rising and banks are lending less on housing then a major form of small business lending has just dried up.

Banks have never kept stats on whether a home loan was really a business loan.

Home loan interest rates were less than business interest rates so guess what the loans were described as.

How can you make good decisions on uncertain data?

Agree, catagorising loans is difficult. What catagory is a loan to an SME when it is secured against the business with a GSA & business location mortgage but inculdes recourse to the a mortgage over the family home and PG's of Directors/Directors parents.

A true business loan should be one with security only on the assets of the business with no other recourse to the owners. Wonder what the statistics would be for that one?

Banks have never kept stats on whether a home loan was really a business loan.

Yes, they do. And with a little bit of effort, you could know that too.

Take Kiwibank as an example, I have their GDS to hand...

In June 2010 they had $9.6b in residential mortgages, according to their Cap Ad measure in the GDS - this is where they report the split of loans based on security (it's page 111).

In note 26 (page 60) they report $9.0b for concentration of credit risk to hosueholds - this is where they tell you where the money's coming from that repays the loan, a little bit of this will be 'consumer' debt though.

So, based on the very high-level info they publish, at least $600m of their loans secured on houses are for SME's.

Sorry to disagree but while banks may attempt to categorise loans they have no idea, you have made some assumptions based on available information from a small bank.

I know for a fact that my business mortgage is categorised as a residential home loan.

Suggest you ask a bank economist, as they are aware of the shortcomings.

The mortgage brokers/staff are incented on mortgages paid out and will structure the application accordingly, not  on details that might be useful for this type of discussion.

As someone who has attempted to reconcile this info at the coal face, good luck with your analysis.

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