More people are paying off their mortgages than are signing up for new ones

More people are paying off their mortgages than are signing up for new ones

People are paying off their mortgages at a faster rate than they are signing up for them, newly released census data suggests.

There is also an increasing trend for people to own their homes through a family trust and the number of households renting a home is also growing strongly.

That information was in a swag of census data released by Statistics NZ this week.

It showed that between the 2006 and 2013 censuses, the number of households making mortgage payments, either on a property they owned themselves or through a family trust, increased by 2.7% to 490,812.

But over the same period, the number of households living in their own home and not making mortgage payments (ie, were mortgage free) increased by 5.8% to 416,772.

That means that among homeowners, those without a mortgage are growing at more than twice the pace as those who have a mortgage, and the gap between the two is narrowing.

In 2006, there were 84,219 (17.6%)  more home owning households with a mortgage than there were without a mortgage, while in 2013 that number had reduced to 74,040 (15.1%).

The data also shows a strong trend towards owning homes through family trusts.

Between 2006 and 2013 the number of households living in homes they owned themselves actually declined by 2.5%, while the number living in a home owned by a family trust increased by 28.2%.

The figures suggest that nearly a quarter of all owner occupied homes are now owned by a family trust.

There has also been a big increase in the number of households renting. Between the 2006 and 2013 censuses, the number of households paying rent (excluding those paying rent to their own family trust) increased by 16.7% to 453,135.

In Auckland, the number of households renting increased by 18.5% to 154,347.

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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15 Comments

This is a problem for banks as repaid loans destroy money from the system. 
NZ still has cautious households more focused on debt repayment than new loans, mindful of the GFC which was a strong warning, and households do not particularly believe the media story of the Rockstar economy. 
Why is there diminishing loan growth?   How are potential NZ house buyers reacting to the LVR and threatening rate hikes?  The consumer in NZ is a lot more cautious now than pre 2008.   
We are not going to return to Old Normal anytime soon.  

You make it out that paying off a loan is a bad thing. I am one of those people who have taken advantage of low interest rates over the last few years and repaid my mortgage. Could not be happier. My motivation was nothing to do with the state of the economy it was about removing the shackles of the bank from around my neck. It is the freedom of not having to work for the bank but being able to work for myself. You would not know how liberating it is. In fact it was overborrowing which caused the GFC. Prior to the GFC, people were treating their homes and credit cards as their own personal piggy banks. This may have kept the economy bouyant and funded the government's spending programmes at the time, but it was never sustainable, as it proved.
I think the consumer should be more cautious and about borrowing and banks should be a lot tighter when it comes to lending money. Over extending your credit only ends up taking away your independence and making you poor. I do agree that our economy would never be a rock star. It is making gradual improvements, but never stellar. As much as it would be nice to continue, the people of NZ have a habit of turning it around very quickly. When that does happen. at least I will have a roof over my head.

Yes, agree, on a personal finance / household level early debt repayment is a good thing.  
Its the systemic effect of many households all doing this that is affecting banks now, and on retailing, small service SMEs etc.   

Its interesting that some ppl seem to think that its the welfare state that has and will cripple us. I dont agree I think its the consumer state (ie consumerism) and over-population that has done for us. When the consumer state that is held up by debt, finds debt is disappearing, its bye bye time and well that in turn will finish the world's economy as we know it.
Now when the retail/consumer sector is 50~70% of the economy and that shrinks enormously, oh boy is that going to have a big effect, ie job losses. Then commercial property will nose plant, then in turn pensions....and then in turn retail  again as many ppl become poor.
 
regards

Weeeeell, I'd prefer to be frugal with things like mortgage/rent, utilities, insurance and all the rest of the involuntary expenditures of life, to leave me with more disposable income to acquire things I actually want, not just need. Not to mention having some kind of savings for retirement.

I wonder whether the real problem is that the beneficiaries of consumer capitalism avoid paying an appropriate tax on their profits. And it doesn't just threaten the "welfare" part of the  "state" but the whole state as well - hence the massive borrowings by governments - much of it just to pay for core services (i.e. education, infrastructure, law and order, etc.). 

Could not agree more, I stuffed up and fixed my morgage at 8.6% for 7 years but finished paying it off last June. We DO NOT have a rock star ecomomy and never will, its been on the slide for years for the increasing majority of people. NZ has no stamina whatsoever and a few months of downturn here and you witness a crash. Another worldwide crash is inevitable but like you said we at least have a roof over our heads, unless of course things get so bad you even have to defend that.

Yep, I agree.
a) a repaid loan is in effect the destruction of the money initially lent, good to lay that fact out as ppl dont seem to appreciate this.  
b) Not just the banks though, the banking sector is way too big for the size of the future economy Nz and indeed the world, see f)
c) Diminishng loan growth, is still however growth. Steve Keen does say that Minsky points to the acceleration of debt as the driver and not debt by itself, so if that accelation is slowing so to will the economy. 
d) NZ households, Im still surprised on how bouyant that spending is myself considering so many ppls seem to have had no pay increases for several years.
e) LVR reaction, I think we can see just how badly LVR hit, many ppls seemed surprised, I guess they dont read Steve Keen on how even small changes in LVR have a big effect.\
f) Old normal, never....no more cheap energy.
regards
 

Agree, this is a "problem" for banks but something good for society.
When debt is paid only the loan money is destroyed, but the interest that the bank was charging is not destroyed and this money still exists in the system. In other words, a bank lends money that does not exist (!!) and charges an interest that does not exist (!!) creating devaluation of the existing money (you cannot buy the same things with $1 now that what you could some years ago with $1), inflation, legal thievery.
So yes, banks are not able to steal at the same pace (because when you lend something you don't have and charge an interest for it that should be called stealing). And when money is destroyed from the system the stock markets are more likely to fall as there are less transactions, and inflation is better controlled.
I hope one day the cash ratio for banks becomes 100%, the leverage disappears (so banks don't lend what they don't have) and society will see inflation and money increasing ONLY through real value added to society and not through debt.

So the loan money is destoyed when the debt is paid? I don't think the money (ie cash) ever existed at all - so there is nothing to destroy, just some zeros in an account balance, and maybe a reduced bonus for the bank worker..

Well... according to all the doom gloom and despondency brigade on interest.co.nz the country is going to rack and ruin because of all the housing-induced debt in New Zealand.
Yet the census shows debt on housing is getting less and less and less 'cause people are paying their debt off faster than new debt is raised.
Hmmm...
Yup, all's still good in landlord land.
 
 

I think the census just shows that the number of properites with debt is increasing at a slower pace than the number of properties without debt. Just means that the properties with debt have, on average, more debt. Which we know. All a bit of so what?

Rents falling ....landlords starting to squirm me thinks.

When the price is too high, people stop buying.. 
If the global price of milk is $2 a litre, but the NZ price was $5 then less milk would be sold in NZ supermarkets. 
When mortgage interest rates in NZ are far more expensive than UK, USA, Australia, Canada, Eurozone, then less people are prepared to pay this globally-misaligned price of money.  
Mortgage rates have only one way to go to attract customers, & that is downwards.  And potential mortgage customers need to hear a different message/mantre than 'panic, panic rates are going to rise, quick, quick, fix fix'