Latest Reserve Bank figures show that annual mortgage growth has slowed for the first time since last November

Latest Reserve Bank figures show that annual mortgage growth has slowed for the first time since last November

By David Hargreaves

The annual growth in outstanding mortgage money has slowed for the first time since last November, according to new Reserve Bank figures.

In recent months the annual growth rate in mortgages has shown, arguably, surprising resilience, blipping up above the 6% level and beyond.

However, in June, the growth rate dipped to 6.2% (from 6.3% in May) on the back of moderate monthly growth in outstanding mortgages of $1.446 billion. That figure includes both bank and non-bank lending.

The moderation in these figures appears very much in line with the tepid nature of much of the housing market at the moment.

Growth in personal borrowing, which was quite considerable a couple of years ago, (hitting an annual growth rate of 8.6% in January 2018), is continuing to slow markedly.

In June the annual growth in personal borrowing (both bank and non-bank) dropped to 1.2% from 1.7% the previous month.

The 1.2% growth rate is the slowest in this sector since August 2013, with just a net $17 million added in borrowing in June.

Elsewhere, borrowing by the business sector continued to be volatile.

In June businesses took on a net increase in debt of over $1 billion, pushing the annual growth in business debt to 5.3% up from 4.7%, after the growth rate had slumped from 6.2% in April.

In the much-watched agricultural sector, debt levels rose around $150 million in the month, to over $63.6 billion. However, the annual rate in growth of this debt slowed to 3.1% from 4% the previous month.

The 3.1% annual growth rate for agriculture debt is the lowest since late last year.

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Another OCR should see us right. The show must go on.

All I want for Christmas is 2 years fixed at 3.5%.


A growth rate of 6.2% in mortgage debt is still not "moderate", it is still vastly outstripping the growth of incomes.

Yes but why compare the two?


Oh I dunno Yvil, what do ordinary people pay their mortgages with?

Ah he's googling the answer

… oh boy, if only you lot were a bit smarter… and of course NZ Dan's comment gets a whole lot of thumbs up. Really doesn't say much for the financial literacy


You of all, can least afford to talk about being smart or not, surprised you were able to complete your sentence..

Such high credit growth is clearly in excess of nominal GDP growth and hence it is clear that it must be creating unsustainable asset bubbles that result in banking crises – as the Quantity Theory of Credit has postulated since its inception in 1992; Werner, 1992, 1997; 2012, 2013). Link-section III.

I read the article and while it was very interesting, there is something that confuses me. In Figure 1 in the Article, the professor claims to demonstrate how banks create money. The figure shows a new loan of $1000 to a customer. The bank A now owns an asset (a receivable loan) of $1000 and create a fictitious customer deposit of $1000 to balance the entry. Therefore, the bank has added $1000 to the credit pool. So far so good. However, when the customer withdrawn the loan (e.g. to buy a car) the bank will need to pay the credit balance to another bank (to be deposited in the seller's bank account). The Bank A needs to either transfer cash to bank B or to purchase credit from Bank B of $1000. In both cases, the fictitious balance of $1000 is replaced with something real (e.g. a reduction in cash or increase in actual liabilities). The interbank loan of $1000 is on demand, so it cannot be included in the capital adequacy ratio of the Bank A! so it will need actual deposits from others to maintain his capital adequacy ratio. Am I wrong?

It's somewhat unintuitive - whilst there is some transfer of reserves, in fact for the most part it isn't ever anything "real", simply accounting. There's a great article from the Bank of England that explains it in detail with lots of practical examples:

If you simplify the example and imagine there is just a single bank that every party banks with. Say someone goes to buy a car with that money it then gets deposited into another persons account (and in this scenario at the same bank). Thus, money HAS been created.

The only time the money is removed from the banking system is if its withdrawn in cash (which is why there is no where near enough cash in any economy for everyone to go and withdraw their money on a given day - as so much of the "money" has been created via debt).

In reality when the money is created it may move to another bank, but in aggregate it is still within the banking system. And for every loan created by Bank A, with money being paid Bank B, you will more than likely see similar flows in reverse with Bank B creating loans and money flowing back to Bank A.

And the Australians have just started a war on cash.

6.2% increase in household debt whilst GDP growth runs along in the mid 2’s? Surely anyone other than a banker or someone on the government gravy train, must see this as a concern?

Shite, they didn't educate that in the education factories.

A sovereign nation has the right to issue its own legal currency and hands over the supply of "money" to private institutions, and the banking system regulator attempts to influence inflation at the bottom of the cliff rather than understanding money supply at the top before it falls over the edge. I really don't see a problem with that.

Reduction in personal debt growth is a good thing

It's not a good thing that in a slowing economy, businesses appear to be borrowing to pay wages. "In June businesses took on a net increase in debt of over $1 billion, pushing the annual growth in business debt to 5.3% up from 4.7%, after the growth rate had slumped from 6.2% in April"

Job losses are iminent. Sagging rents will come soon afterwards. Yes, rents do fall. It was a super quick recover post 2008 so rents did not fall markedly but vacancies rates soared as the graph in the attached link clearly shows "2009 was just after the global slump and had exceptionally high vacancy levels."

With this slump more likely to be a prolonged one, rents will fall in tandem with nationwide house prices.

Not when its going to turn into a reduction of spending in the productive economy. Less spending = less production and services wages = less growth in the economy.

I can't see justification for a cut in the OCR. Not in the credit aggregates anyway. They still look okay, see. Maybe if one acknowledges there's 15 or so billion less FDI buying existing houses...

CPI is below 2%. End of story.

hate to break it to you but the CPI isn't as simple as some posters hereabouts.

Yes it is... Some posters like to make things sound more difficult than they are because it makes them feel intelligent, in reality they're just twats.

This is playing out almost identically to what's been going on in Australia.

So the growth's growth is less than it was? Is that what we should really be focusing on or the fact that there's still (inexplicably) some growth? In other words, the exponential keeps pointing up, just not as much.

The change in the pace of debt growth is enough to cause a recession. See Ireland 2007, Spain 2007, UK US 2007, Australia (not there yet but getting close and already in per capita recession). Ralan (big Aussie developer) went bust yesterday.

My remark yesterday seems to have disappeared about people talking up housing market and need for more debt

Our mate Joe Wilkes is notably absent from the debate, too...I would have this topic would have been right up his alley.

Joe’s account is no longer active on this site.

There was a DFA video a couple of days ago where he talked about him being banned from the site. The title is "Is DFA disappearing?"

Another OCR cut looming then?

Excellent information - thank you.
The news is paving the way for more cuts to the OCR as we slide down towards the zero band with every other debt slave nation.

Given how Westpac and now ANZ have been whacked with AIRB non-compliance, thus have to hold more capital, I'd say the resulting restriction on lending capacity will be a factor.

The storms coming and more and more people are beginning to see it. I'm not getting anything positive back from those people who are still working as to the state of business confidence, which is now translating into actual drops in income. The brakes are coming on hard, you better have your seatbelt fastened.