Kiwis gear up

Personal Finance

New Zealanders borrowing at their fastest rate since the Global Financial Crisis with net home loan growth up $1.5b in a month

30th Jun 15, 4:00pm by Gareth Vaughan

Housing debt grew at its fastest annual pace in 13 months during May and surged a net $1.5 billion month-on-month, the latest Reserve Bank sector credit data shows.

By the end of May New Zealanders had $202.347 billion of housing loans, the Reserve Bank data shows, up 5.4% year-on-year which is the fastest annual growth rate since April last year. Total household claims, which includes consumer debt, rose 5.5% year-on-year in May reaching $217.564 billion.

Business debt rose 6.1% to $86.214 billion and agriculture debt rose 6.4% to $56.074 billion.

"Overall credit growth is running at its fastest pace since the Global Financial Crisis hit over 2008 and 2009. Housing credit will be the part catching the Reserve Bank’s eyes the most. It is clear that, even before the Reserve Bank cut the Official Cash Rate (OCR) in June, past falls in interest rates were already fuelling mortgage borrowing demand. We still expect a July 25 basis points OCR cut (to 3%), with some risk of further cuts. But the borrower response to falling interest rates, along with the weaker NZ dollar, may temper the Reserve Bank’s preparedness to cut too much," ASB chief economist Nick Tuffley said.

Tuffley also noted the surge in housing lending was the strongest monthly dollar value growth since November 2007.

"The temperature remains high in the Auckland housing market, with signs of lifting activity elsewhere. Declines in mortgage rates are likely to be playing a part in stimulating the added lending growth. Consumer lending growth is also holding up, at around 6% year-on-year," said Tuffley.

In the year to May consumer debt rose 6.3% to $15.217 billion.

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22 Comments

by Crazy Horse | 30th Jun 15, 4:35pm 1435638938

Housing Lending growth ...... truly wonderful for economic growth for the good of the country ...and where's that gonna get ya kiwis (esp. in Awklund) ..... a very small economy can never compete with China .... they have "funny munny" to burn ..... Awklund could be bought out as fast as a Chinese lantern rises out of site .... good bye .... say good bye to the life you have known as when the banks are pressed they will show "no mercy" ....nothing is worse in this world than a banker not making a profit at the expense of all and sundry ... you will PAY I will PAY .... don't let anything get between a bank and its profit !! ...you have been warned

by Stephen Hulme | 30th Jun 15, 4:56pm 1435640199

Total household claims, which includes consumer debt, rose 5.5% year-on-year in May reaching $217.564 billion.

Business debt rose 6.1% to $86.214 billion and agriculture debt rose 6.4% to $56.074 billion

Oops - all sectors of credit extension rates above the nominal GDP growth rate.

by MikeM | 30th Jun 15, 6:10pm 1435644650

I concur, Mr Hulme. Surely a great train wreck in the making........

by 2 Tooth Bora | 30th Jun 15, 6:14pm 1435644864

As long as the Government do their job and don't let us end up like Greece by letting foreign get out of control.

by tim12 | 30th Jun 15, 6:56pm 1435647410

Inflation is what paid the debts in the past. $70,000 dollar house bought 20 years ago could be worth $350,000, doesn't really matter if you still owe $20,000.With interest rates getting to the point where they can't really get much lower, why buy? Where will house prices go in the next ten years? Interest rates can't go lower, if the market takes a downturn, how can the government prop it up ( like it has done with the dairy farmers). People assume that everything will continue as it has in the last 20 years with inflation, I'm not so sure. Is this generation the last to join thhe debt ponzi?

by Chris_J | 30th Jun 15, 8:38pm 1435653517

That's what people said in the nineties after low CPI inflation arrived... And look what happened.

$160,000 in Grey Lynn in 1992 is now worth $1.6m.

by notaneconomist | 1st Jul 15, 12:21pm 1435710078

Best everyone thanks the real people who were underwriting the debt and did the hard work for the country....like exporters!!

by Hamish | 1st Jul 15, 1:58pm 1435715887

The subset of exporters who aren't also borrowing against their predicted future capital gains?

by MortgageBelt | 30th Jun 15, 6:54pm 1435647240

Wonder what the typical, or median, or average housing loan is for Auckland buyers? First home buyers, and early 2nd home buyers etc. I.e excluding top ups, provincial mortgages, and older buyers with major equity.
For example, a two income couple/family, household income 150k, mortgage 500k plus?

by sharetrader | 30th Jun 15, 11:29pm 1435663767

Income average is lower than that , its only around 15% that earn 70k +
http://stats.govt.nz/Census/2006CensusHomePage/QuickStats/AboutAPlace/S…

by MortgageBelt | 30th Jun 15, 11:40pm 1435664453

Hmm... But to service an Auckland mortgage of 500k or more you would need servicing ability up there surely.

by sharetrader | 1st Jul 15, 12:10am 1435666231

that's why FHB are being driven from the Auckland market, unless both of the couple are in the top 15 % of income earners there ability to a save the deposit and service the mortgage has become much much harder.
they are being replaced by immigrants that can afford a much larger deposit and can therefore service the loan on a Auckland wage.
we now have a situation where the Young local population are being disadvantaged and I feel for them as I can not see the situation reversing

by rjf | 1st Jul 15, 8:39am 1435696792

When we bought banks were willing to lend us a million bucks on a just-over $200k household income. We politely declined and borrowed less than half that figure.

I expect there are a lot of young couples out there eating noodles in $800k houses. Want children? No chance.

by SmoKey | 1st Jul 15, 11:55am 1435708537

Isn't the Reserve Bank supposed to be thinking of limits on lending based on multiples of income ?

by SmoKey | 1st Jul 15, 12:16pm 1435709788

Isn't the Reserve Bank supposed to be thinking of limits on lending based on multiples of income ?

by bigblue | 30th Jun 15, 8:57pm 1435654646

30 percent of homes in Auckland have no mortgage if last census is to be believed

by David George | 1st Jul 15, 6:53am 1435690416

If that number is correct (it sounds reasonable) and say another 30 or 40% have a low and falling mortgage balance then there are a lot of very exposed home "owners" out there in jafa land.
This latest jump in debt must be a worry for the RBNZ and begs the question; where's it all going? Expansion of productive assets or speculation, consumption, malinvestments and farms and businesses borrowing to keep their heads above water? I suspect we're entering another bound to fail debt driven boom only this time we already have high asset prices, high debt levels and the reserve banks pouring petrol on the fire. Good luck hoping this one will lead to anything other than a significant recession or worse.

by PeterPen | 1st Jul 15, 8:34am 1435696492

No, dont worry. When it comes to the worst the RBNZ will do as big brother, lower rates very temporarily to zero for about 10 years and print one trillion NZ$s or so. We are told it is modern central bank policy. And a lot or people in this very forum wanted a money printing program even when there was no need, just to keep up with the neighbors.

by xelnaga | 30th Jun 15, 9:20pm 1435656056

Credit fuelled bubble.

by fat pat | 30th Jun 15, 10:35pm 1435660556

If the horses get spooked then that credit spigot will start turning off. There's a lot of spooky things going on at the moment. I guess that's why the ANZ economists were saying the market could turn on a dime.

by John | 1st Jul 15, 9:33am 1435699992

We live in a world that requires us to borrow rather than save to get ahead and to this end we must maintain this at all costs otherwise society unravels. How did we get to this position? I am guessing the tipping point occurred when the financial markets stopped being an enabler and relying on the real economy and then took on a life of their own.

by cowboy | 1st Jul 15, 10:40am 1435704019

Yes we have to start trying to ease off the addiction before the 11:59 minute hits.

The tipping point was post-WW2 when governments needed fake funding to write-off their war debts.
There are also tricks like a bank writing a cheque that was deposited in a friendly bank, then withdrawing the funds to cover the cheque to make it's own position liquid for the weekend duration (when the legally required liquidity tests were being run). Back in the day that waws kosher by the written rules so allowed, today you wouldn't get away with inventing something like that because the law is no longer "in stone" for such matters.