Mortgage lending hit a record high for a second consecutive month in October.
According to the latest Reserve Bank residential mortgage lending by borrower type figures the October lending figure of $7.8 billion was the most since the RBNZ started compiling this monthly data in 2013.
And it eclipsed the previous record of just over $7.3 billion set only in September 2020.
The latest month's figures confirm that investors are now very much on the march in the market again and are picking up share of the market at the expense of the first home buyers.
The $1.9 billion borrowed by investors last month was the highest amount by this grouping since July 2016. And July 2016 is significant - since that's when the RBNZ clapped tough minimum deposit requirements on the investors, slowing them down.
Also very significant is the fact that high loan to value ratio (LVR) loans to investors jumped again in October.
For investors, a high LVR loan is one where the amount borrowed is more than 70% of the value of the property.
In October the investors borrowed $745 million on high LVR loans, up sharply from $611 million in September. In June, the first near-full month after lockdown the investors borrowed just $204 million in high LVR loans.
The housing market has been on a tear since New Zealand emerged fully from lockdown in June, with prices rapidly increasing.
The RBNZ lifted LVR restrictions, which had been in place in some form since 2013, in May, with the intent that they be removed for at least 12 months.
However, the RBNZ announced earlier this month that it was going to consult with the banks on reintroduction of the LVRs from March 2021. This will be on the same terms as when the LVRs removed, requiring investors to come up with 30% deposits while there will be limits - 20% of banks' new lending - on LVRs over 80% of the value of the property for owner-occupiers, including FHBs.
The RBNZ has noted the rise of more leveraged borrowing from particularly investors, following the dropping of the 30% deposit rule.
First home buyers have been very active in the market this year, gaining record share for this grouping in the monthly mortgage figures.
And while the FHBs are still borrowing large amounts each month, their overall share is now falling again in the face of the increased activity from investors.
In October the FHBS borrowed exactly the amount they had in September, at just under $1.4 billion.
However, this made up just 17.9% of the overall amount borrowed by all groups in the month, down from 19.1% in September (and it has been over 20%). In contrast the $1.9 billion borrowed by investors in October was 24.4% of the total, up from just 22.7% in September.
This is the detail supplied by the RBNZ:
- Total monthly new mortgage commitments were $7.8b in October – the highest month on record since the survey began in 2013.
- This is an increase of $0.5b (6.3%) from September 2020 and 28.1% from October 2019.
- New mortgage commitments to other owner occupiers were $4.4b in October, up from $4.2b in September while new commitments to investors increased from $1.7b to $1.9b.
- First home buyers accounted for 17.9% of new mortgage commitments in October, down from 19.1% in September while share of new commitments to investors rose from 22.7% to 24.4%.
- The nationwide year-on-year growth in value of new mortgage commitments to first home buyers was 26.6%, while the annual growth in new commitments to investors was 58.8%.
- The year-on-year increase of 28.1% in new mortgage commitments was evenly split across Auckland and non-Auckland regions. The annual growth rate for new mortgage commitments in Auckland was 29.9% while areas outside of Auckland grew by 26.6%.
- Monthly new mortgage commitments with high loan-to-valuation ratio (LVR) to investors have increased since the restrictions were removed in May 2020. High LVR new mortgage commitments to investors saw a monthly increase of 22.0% in October.