Non-performing housing loans rose again quite sharply in the last month after seemingly stabilising for several months.
In addition, there was another reasonably substantial rise in overall non-performing loans across the whole banking system.
Latest Reserve Bank loans by asset quality figures for October show that non-performing housing loans rose by $71 million (5.3%) to $1.414 billion.
That's the biggest monthly increase since May.
These figures are coming off a very low base. But nevertheless, year-on-year the non-performing housing loans are up by $606 million - or 75.1%.
It means for housing loans the non-performing loan ratio remains around 0.4% of the total.
Across the whole banking system, total non-performing loans rose by $237 million (7.6%), to $3.342 billion. That took the non-performing loan (NPL) ratio up to 0.60%.
By some means of comparison, in the post GFC period, the non-performing housing loans ratio hit 1.2%, while the total system non-performing loan ratio hit 2.2%.
So, while stressed loans are going up, they are rising from a low base.
In its summary of some of the highlights of the data, the RBNZ said non-performing commercial property loans rose $37 million (15.6%), which pushed its NPL ratio up further from 0.55% to 0.63%. The NPL ratio is up 41 basis points for the year.
Non-performing SME loans increased by $73 million (13.4%). This reverses September’s decline, bringing the value to $622 million, compared to $565 million in August.
Agriculture non-performing loans rose by $82 million (9%), which pushed the agriculture NPL ratio up a further 14 bps to 1.62%. This change was driven by a $125 million increase in impaired loans, while loans 90+ days past due fell $44 million.
In other data released by the RBNZ on Thursday, sector lending figures including both banks and non-bank lenders, showed housing lending stock increased by $1.044 billion (0.3%) in October 2023, with the total mortgage stock rising to $353.611 billion.
The monthly increase, modest as it was, was actually the second largest monthly increase reported this year. The annual growth rate, however, remained at 3.0% for the fourth month in a row. And you have to go back to October 2012 to find a slower rate of annual growth
Here are some of the other sector lending highlights as outlined by the RBNZ:
Personal consumer lending stock increased by $57 million (0.4%), which was down on the $103 million increase reported in September 2023. October’s lending stock growth was mainly driven by banks. The annual growth rate declined from 4.8% to 4.3%, but still remains highest among other lending sectors.
Business lending stock jumped by $1.6 billion (1.2%). The annual growth rate rose from 0.9% to 1.6%. That's actually the first time the annual rate has increased in a month since November 2022.
Agriculture lending stock decreased by $275 million (-0.4%) in October 2023. The annual growth rate dipped further from 1.4% to 1.0%.
32 Comments
The people in the know, know. I understand that there are tens of thousands of, shall we call them 'underperforming' mortgages, out there. The banks are probably intensively managing the situation with individual borrowers to try and get them through, to sell properties in apparently normal looking sales as opposed to obviously distressed or mortgagee sales, etc. Put another way does anyone really believe that there are only 4,000 or 5,000 bad mortgages out there right now. If so, I have a bridge to sell you.
https://youtu.be/EqjrWefjkUk?si=cEQD4ud6cnixdVUb
The Big Short best moments....
Not really ANZ saying flat at best.... and the risk to their forecast is down... look at the provisions, they are quite high.....
The way the game is played is that "Some" of the non performing loans will be forced into mortgagee, enough and rates will collapse.... the fear you will be one of them is meant to stop you spending up large this Xmas, Mr Orr is a sad grinch tho, he is too chubby to act that character IMHO.... you need a thin madman....
I think lower prices are coming next year because they are still nuts compared with average NZ salaries..... its all about metrics... at these prices most young people are way better off in Aussie, as people leave prices will fall and the boat will tip the other way ie IMHO maybe 20% lower is possible yet
In other news, the Wellington Phoenix women lose their vice-captain to 'financial pressure'.
Wellington Phoenix midfielder Chloe Knott puts professional career on hold | Stuff.co.nz
Over on Yellow Fever, the comments are about the poor rate of pay in women's 'professional' soccer - no doubt true. Wellington Phoenix Women General Discussion and Squad Speculation · Yellow Fever Ngā Wana Kōwhai · Supporters of the Wellington Phoenix
But the article says: "Knott was paying rent in Wellington on top of a mortgage in Auckland and would work before and after training every day to achieve her dream of playing for New Zealand’s only professional women’s football team."
Maybe just a very public example of the kind of pressure our younger generation are facing just trying to make a living and putting a roof over their heads, with ridiculously high house prices and now rising (normal-ish?) interest rates.
edited.
idk, I mean she owns a house in Auckland which puts her ahead of a huge number of others her age (though not sure what her equity position is). She's also choosing to persue professional sport, which is a risky career move for anyone. I have some sympathy for her, though at the same don't think she is 'just trying to make a living and put a roof over her head.'
Yes that's really rough. All my friends who've bought even in the middle of nowhere are starting to really stress out (older Millennials) because the interest rates have gone up enough that even with professional jobs it's not enough. My friends who want to move can't, because the bridging finance costs are too much. I'm worried because it still can get messier from here.
because the bank lend to the developers they can cut off supply by not lending, this has normally saved their ASS, but if prices really need to drop down 20-30% THIS Strategy will not work this cycle ... my guess is that they are a bit exposed hence their current provisioning....
For resi, roughly $1.4 billion of non performing loans, roughly $360k average loan amount. $1,400,000/$360,000 = 3,888. Let's say 3,000 non performing loans to be safe
And only 38 mortgagee resi properties for sale on TradeMe at the moment, which is surprisingly down from a recent high of 50.
What's blocking the flush out and reset?
The mortgagee sale process runs to a fixed timeline. And that timeline is quite short. Thus searches for mortgage sales only show those in the timeline and a small increase, even from 20 to 30, indicates a substantial uptick in mortgagee sales. (At present, many would-be mortgagee sales appear as normal sales, as the mortgagors are convinced by the banks they'll get a better price than being forced into a sale. Less work for the bank but mainly less PR damage.)
To show this, do a search one month apart, or better two months apart. Do you see the same listings? Only a few.
Unlike a "normal" listing they can't sit there for months, or even years, on end.
Make friends with some real estate people. They usually know which listings are distressed sellers. I doubt they're allowed to disclose this information. Hence why I said "make friends". Long lunches can work.
From NZ Herald:
Centrix’s latest Credit Indicator report revealed the proportion of home loans in arrears climbed to 1.29 per cent, up from 1.25 per cent in September.
There are 19,200 mortgage accounts past due in October, up 25 per cent year-on-year.
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