Mortgage borrowing bounced back in February - but much of that reflects the sheer size of mortgages now

Property / analysis

Reserve Bank figures show February mortgage borrowing rose strongly from January's figures, but first home buyers are getting a smaller share of the lending

24th Mar 22, 3:57pm by David Hargreaves

Latest figures from the Reserve Bank show that mortgage borrowing bounced back in February from a sticky start to the year.

The figures do, however, highlight the fact that there are now far fewer people borrowing - but they are having to borrow far bigger amounts of money than was the case two years ago. More on that further down the article.

The total amount borrowed in February 2022 lifted almost $1 billion compared with January to over $5.7 billion.

That's well down on the $7.6 billion borrowed at the same time last year when the housing market was still 'going mad'.

But the latest figure is comparable to and slightly above the February 2020 figure just prior to the disruptions beginning from the pandemic.

In terms of share of the borrowing, the first home buyers (with $954 million) saw a noticeable drop in their share of the overall total for the second consecutive month, with the percentage dropping to 16.7% in February, from 17.5% in January - which was in turn down from 19.8% in December.

Investors on the other hand grabbed a bigger slice again, with their over $1 billion of borrowing representing 18.6% of the total amount, up from 17.4% in January and 16.6% in December.

While the latest figures suggest a 'return to normality' after the craziness of the 2020-21 period they are in some respects misleading.

The amounts borrowed might be similar to two years ago - but the number of mortgages that represents is way down, a reflection of the huge increase in house prices in that time.

The $5.6 billion borrowed in February 2020 represented 21,5458 mortgages. The $5.7 billion in February 2022 was spread across just 14,867 mortgages - some 31% fewer.

The average sized mortgage in February 2020 was $258,900, rising to $318,600 in February 2021 and $383,800 in February 2022.

That means the average sized mortgage increased a whopping 48% in the past two years, which is a reasonable reflection of what's happened with house prices in that time.

It's a similar pattern for the first home buyers - far fewer of them with far bigger mortgages. The average sized mortgage for the FHBs in February 2020 was $433,000, rising to $505,000 in February 2021 and $566,500 in February 2022.

There's some big mortgages out there and with interest rates going up they are getting more expensive by the day to service.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

66 Comments

by Colin Nemo | 24th Mar 22, 3:58pm 1648090727

BOOM TIMES AHEAD!!!

by Crazy Horse | 24th Mar 22, 5:06pm 1648094808

....question is where does the "boom" come from ?

by tronic | 24th Mar 22, 6:03pm 1648098197

by DTRH | 24th Mar 22, 4:11pm 1648091468

Why are people buying just before a 50% off sale is starting.

by Small Kev | 24th Mar 22, 4:33pm 1648092792

Because to some getting a discount isn’t the most important thing.

by DTRH | 24th Mar 22, 5:56pm 1648097760

Same house for half the price are you sure you understand.please give us a reason why you would not buy same house a lower cost .

by Small Kev | 24th Mar 22, 6:58pm 1648101510

Because it isn’t guaranteed.

Like shopping for clothes, the particular style might not be available if you wait for the discount therefore if people can afford it and willing to pay then why not.

by Llama_360 | 25th Mar 22, 10:12am 1648156348

I have been following the housing market and this site for a few years. When we were looking to buy in July/Aug 2019, I was sure I was making a terrible financial decision and that a correction was imminent. Nevertheless, we decided to buy anyway because my partner wanted to settle into someplace before we had kids. We moved into our place in Nov 2019 then Covid kicked off a few months later. I was sure the economy was going to tank and the 'value' of our house was going to crash. To be honest, I was definitely worried but hardly as much as I thought I expected to be. However, I was still glad that we purchased then. The decision was right for us at the time notwithstanding the risk of a correction. If it were purely an economic decision, I would not have bought a house in 2019 and I would not be looking to buy one now as I'm pretty sure the correction will continue. But for a lot of people, it is not just an economic decision and the benefits of buying can still outweigh the risk of losing money. What is important is for people to make sure they don't risk getting in over their heads (which is becoming even more of a problem recently).

by nightstalker | 25th Mar 22, 12:19pm 1648163965

Similar situation here, except we (FHBs) bought end of July 2021, which appears to be very close to the peak of the current property cycle (Oct/Nov).

While recent sales in our street have achieved 100k more than we paid, I think we will see some losses over the next few months.

Does it matter? We don't think so. Unless we have to sell urgently, we will be holding on to the house for at least 5 years as we appreciate the stability it gives our family and our children.

Having been in rentals for the last 10 years, it was quite stresful whenever the owners decided to sell or we recieved a rent increase notice. Most landlords in NZ don't want to invest into maintenance and upgrades, even if it benefits their property.

When we asked for things like an HRV system for the 2014 built house, which smelled mouldy in the winter months (despite best efforts of ventilating daily & running the heatpump and dehumidifiers) we were told we can pay for it via a rent hike, which we politely decline. Guess what, the hike came without HRV a couple months later!

The worst part was seeing that in 10 years time more than 300k hard earned dollars paid someone elses mortgage.

Assuming house prices going sideways for the foreseeable feature we might well see an actual depreciation/loss of monies invested due to ongoing inflation but the increased ability to build more equity (rather than paying rent) should still work out better in the long term.

by Luke83 | 24th Mar 22, 8:17pm 1648106267

DTRH just because you say house prices are going to drop 50% and I promise you they won't buying a house for some is a sense of pride and self worth. I'm not sure on your experience in this game but your comments would indicate that of a child.

by redcows1 | 24th Mar 22, 8:44pm 1648107843

Hahaha. Pop

Yeah I know.

Childish.

by MisterB | 25th Mar 22, 3:44pm 1648176273

So, just to be clear, you're saying it is IMPOSSIBLE for house prices to fall 50% from their peak (November)

by Independent_Observer | 25th Mar 22, 8:49pm 1648194548

This is a game?

by tronic | 24th Mar 22, 6:06pm 1648098362

It's important to me. I emailed my mortgage broker today and asked him to keep my details but not taking out a mortgage right now. A little time on the sidelines to see what happens when the dust settles doesn't seem crazy to me in the current environment.

by Kinga | 24th Mar 22, 6:10pm 1648098635

I have a friend who has been kicked out of their rental and sick of the disruption and uncertainty and actually can't find another retal so they are looking to buy. They note the high price but better than no house.

It's different for everyone. People shouldn't be so critical

by Small Kev | 24th Mar 22, 7:02pm 1648101722

“It's different for everyone. People shouldn't be so critical ”

Exactly right, different mentality, different people forms the “market”.

by DTRH | 24th Mar 22, 7:04pm 1648101884

Kings if he’s a friend why not let him stay with you for a while.

by Room319 | 24th Mar 22, 8:44pm 1648107843

"People shouldn't be so critical "

Dude you've come to the wrong 'hood.

by Kinga | 25th Mar 22, 2:53pm 1648173209

On the contrary it is a place for opinions of which mine and everyone else's should be appciated and enjoyed

by Room319 | 25th Mar 22, 6:51pm 1648187469

Oh for sure,but there has been a prevalence in the last year or so for a group of posters on here to be abusive toward an entire generation and/or those with a different perspective.

by swapacrate | 25th Mar 22, 9:38am 1648154287

Yeah personally I don't want 100's of thousand discount, I really don't want to cloth my kids and feed them. Rather other people have my money so they can have a nicer car, foods overrated.

by northman46 | 24th Mar 22, 4:45pm 1648093551

I don't disagree, but I was reading the same thing on here early 2020. I can understand why people would be skeptical, plus needing to get on with their lives.

by DTRH | 24th Mar 22, 6:31pm 1648099860

With inflation high and interest rates raising people on average wages have no chance of buying a home in Auckland a million dollar mortgage cost 5800 a month to pay if rates go up around 2% this would be 7300 a month over 30 years and all this would buy you in Auckland is a small 3 bedroom house on a small section.when you look at facts this market is going down, anyone who is buying now has had bad advice and has no clue what drives the housing market.

by Luke83 | 24th Mar 22, 8:26pm 1648106800

DTR 1mil at anz 18 month rate of 4.99% is $5300, a month, add the 2% so that makes 6.99 % monthly is $6646 stop making crap up, wishful thinking gets you know where.

by swapacrate | 25th Mar 22, 9:43am 1648154620

$6000 sounds like a bargain for average income. $72000 a year everyone has that, just don't worry about food, electricity, fuel, water and other things you need to survive on. How can a bank lend that much on an average wage, bonkers. Watched The big short, that sounds like a CDO what was it a synthetic CDO, I think.

by nightstalker | 25th Mar 22, 12:33pm 1648164797

Most mortgages of this size are taken out by families which have two income earners.

Those families would need more than a single bedroom in a flat.

This means they would pay around/upwards $750 rent per week.

Yes, a 50k mortgage a year is a big sum but knowing that a portion of that is coming back in form of equity (even more so the longer you pay it down) is why it's worth it unless that equity depreciates massively for whatever reasons.

Looking at long term history globally, it is unlikely that you will go backwards on a house if you're in for the long game.

People that think inflation will not affect rent etc are deluded. Of course increased costs in servicing a rental property, increased costs of borrowing for rental property will result in higher rents (unless there is a massive oversupply).

The result of inflation is that people (renters & home owners alike!) will cram into smaller and smaller spaces due to long term inflation making space more precious.

This trend can be observed everywhere from the shoeboxes in Hong Kong, Paris or Japan to new builds in NZ. Don't fool yourself thinking the house on a quarter acre from the '80s is the same as a townhouse on 200-300sqm.

by Averageman | 24th Mar 22, 4:56pm 1648094190

I dont get it either. If you are laundering money or something then sure, but legislation is supposed to stop that now.

by Pragmatist | 24th Mar 22, 7:48pm 1648104516

There will be no 50% off sale. You're delusional if you think its going to fall that much.

Auckland median house for ~$550k? That was 2007ish pricing, how much have incomes increased since then? Average household income has doubled since then according to infometrics, median maybe not quite doubled, but probably not far off.

by 7jai | 24th Mar 22, 7:59pm 1648105185

Keeping dreaming pal. Don't worry, your time will come. Maybe another 40 years and you will get a crash? Probably from a comet collision.

-7

by live4ever | 25th Mar 22, 10:00am 1648155631

Because the good houses are still few and far between. We happened to buy just now - in the area we were looking only 2 houses per year meeting our requirements have been put on the market in the last year. We don't want to put our life on hold for another year or two just because prices 'may drop'. We'd just have more buyers to compete with when that happens too, so not worth the risk!

by Solid_Granite | 25th Mar 22, 10:26am 1648157161

Very interesting how perception seems to be its 'risky' to NOT buy a house and get into huge debt. And how this persists despite the market downturn.

A good reason why I think inflation will get a lot worse; people are simply losing faith in money. to the degree they'd burden themselves with a million dollars if they can have somewhere to live. Won't think twice.

by northman46 | 25th Mar 22, 1:04pm 1648166647

It depends on where you are in life too. I hope to buy this year (though not in NZ). I've no interest in timing the market. I just want a home. Prices slowing down sure has reduced the anxiety and yes I hope prices fall before I get in, not after.

The alternative is another $30k pissed away on rent, to an inattentive landlord that I greatly dislike, for an shitty apartment that drives me insane. Plus annual inspections, telling me I can't have pets, rent increases or having them sell whenever they like. It's intrusive and I'm getting too old for this life style. Plus, as you say, watching my savings inflate away.

Just my take. Granted I earn a fair bit and have job security, as does my wife. We could ride it out. I'm not sure why those with low deposits or incomes would be as keen.

by Small Kev | 24th Mar 22, 4:25pm 1648092358

Banks are desperate for business that’s for sure.

by Crazy Horse | 24th Mar 22, 5:10pm 1648095052

NEVER ever underestimate the banks desire for profitable business - at any "cost" .....with 25% of each of the big 4 Aussie banks owed by Wall St, you wouldn't expect anything less .......moral compass - what's that ??? ....as Gordon Gecko said "GREED IS GOOD" !

by ozzzy2 | 25th Mar 22, 12:00pm 1648162835

Not as desperate as 'some' morally bankrupt Real Estate Agents - still pushing the big envelope. I find that most houses, in most areas outside of Auckland, are still at least around $100k over priced.

by Nzdan | 24th Mar 22, 4:31pm 1648092661

https://www.oneroof.co.nz/news/buyers-accused-of-bullying-vulnerable-se…

In one extreme example, a buyer asked for a $200,000 price reduction because the property market had cooled since he had bought unconditionally in November.

“This buyer said that since the market has dropped and he wasn’t getting lending on the November price, which was over $1.2m, he was now asking to pay just over $1m,” Rawson said.

“My vendor is blown away by it all, asking ‘What’s a contract worth?’ It’s completely stuffed up her retirement plans.

by Independent_Observer | 24th Mar 22, 4:36pm 1648092976

“You don’t know what other commitments they have. We had one guy who’d bought five or six properties with a 5% deposit each,” the agent said.

“He had four or five months to settle, but he still defaulted. I think he thought he could sell some and develop some.”

Crazy stuff. Who is entering into contracts like this? Still conditional on finance in a market that could be going up and down 30% a year.

by nktokyo | 24th Mar 22, 4:40pm 1648093258

Gurus and their students.

by Independent_Observer | 24th Mar 22, 4:46pm 1648093595

If the market goes up and costs are contained.....great....gamble worked....but if it drops....you are &%#'d!

by northman46 | 24th Mar 22, 4:48pm 1648093706

It’s completely stuffed up her retirement plans.

Has she tried cutting back on the flat whites and avo on toast?

by Independent_Observer | 24th Mar 22, 4:58pm 1648094326

Might have to compromise by getting the entry level RV and e-bike for retirement cruising as opposed to the luxury option they were expecting.

#toughtimes

by northman46 | 24th Mar 22, 5:14pm 1648095265

"I've worked hard my whole life, so give me your moneyyyyy!" she screeched*.

*Probably.

by youngdumbandfullofit | 24th Mar 22, 7:17pm 1648102633

If your retirement plans were totally based off the past 12 month historically unprecedented gains on a single asset I mean... Where is my damn violin?

There's dreams and hopes, but an asset returning to it's year ago price does not make or break a retirement "plan" one would hope...

by Kinga | 24th Mar 22, 6:13pm 1648098829

I assume the vendor got to keep the deposit though even if the sale falls through?

by printer8 | 24th Mar 22, 6:52pm 1648101158

Kinga

Depends on the conditions attached to the offer.

If there was a condition on finance (and the particular wording of that condition) and the potential purchaser was not able to obtain the finance as per that condition, then yes the deposit - usually held by the REA - would be returned. The vendor would have no claim to the deposit in such a conditional offer.

And in realty the agent would be - in his/her interest - would likely be supportive of that amended offer

by Pragmatist | 24th Mar 22, 7:32pm 1648103549

"In one extreme example, a buyer asked for a $200,000 price reduction because the property market had cooled since he had bought unconditionally in November."

by printer8 | 24th Mar 22, 8:32pm 1648107160

Pragmatist

Sorry, I missed the “unconditional” in nzdan’s extract.

by Nzdan | 24th Mar 22, 8:32pm 1648107140

I guess keeping the deposit is a consolation, usually a deposit of 10% is required to be held in the trust account. The 10% deposit is not a win if the next best offer is 20%+ less.

by printer8 | 24th Mar 22, 8:37pm 1648107445

Nzdan

Yes, but a considerable chunk of that 10% deposit would be sadly going as commission as though the sale was completed as per the usual agreement between the REA agency and vendor.

by Market Interest | 25th Mar 22, 2:03pm 1648170203

Surely if the buyer defaults that commission is not payable?

by swapacrate | 25th Mar 22, 10:16am 1648156615

It happens in the UK all the time happened to us, buyer pulled out at last minute, at least they get the deposit. We were shafted for ages by another buyer as well, just made us wait while we took house off the market, but got a cash offer so took it, really lucky but it took us over a year of being shafted. Now we are renting and building a long term business that gets bigger every year. Once business gets to a stage we are happy with then we will look at buying. But business is what drives our decision, not property market. So be interesting if we can make a few thousand in savings while we watch what unfolds. Interesting days.

I can't feel sorry for people selling now, they have had the largest increases they could ever get, drop your price get the sale, make a few grand and move on. Or else you will lose more money by waiting.

Our old landlord bought house 1 year ago for $635,000, put house on the market for $930,000, what a joke. Its been on Market for 2 months we will see what he gets. We have a house we are able to stay in for a few years now, so able to work on business with no stress.

by Nzdan | 25th Mar 22, 10:51am 1648158705

Some clever cloggs bought this property in Stokes Valley for $780k in April last year, as a buy and flip. Easily spent $50k on renovations and then found themselves on an investor Facebook page in October asking for advice because nobody would pay them a profit to take it off their hands.

I think it ended up getting rented out.

https://homes.co.nz/address/lower-hutt/stokes-valley/105b-kamahi-street…

by ikimpaul | 25th Mar 22, 11:40am 1648161645

i remember this place - listed it at 900K - 10th Nov and correct took it off the market on the 8th Feb and rented it.

I have 8 houses currently listed for the hutt valley as not getting the sale price they want and subsequently listing the property for rent.

Prices asked for the properties range from $1.3M in Tirohanga to $700K in Waiwhetu.

by Averageman | 24th Mar 22, 4:54pm 1648094082

Be quick....to boost bankers bonuses and profits.

by Crazy Horse | 24th Mar 22, 5:23pm 1648095805

....just a little update for property for sale on TradeMe for Auckland

February 19 , 2022 was 11,276 and today is 12,561 ....it's on the "up" all right !

by quality guy | 24th Mar 22, 10:18pm 1648113530

I think 7% mortgage rates are coming at current inflation rates.

Question.... If incomes are so high then everyone can afford $5300 per month mortgage payments at 4.99% can't they?

Auckland income average is what? 70k?

I think you need $100k income to service that $5300 repayment at 4.99%.

And potentially $140k income to service 7.00% mortgage at $1million..

Reality check: Average NZ wage is $58k. And everyone wants a $5k increase to keep pace with inflation. Some want more.

Fact is you could we'll see 10% inflation.

NZ dollar is falling against US Dollar as Fed raises rates, and that is in itself also inflationary. Russian oil and wheat prices also inflationary. That's your extra 3% inflation from 7% to 10%.

I do the weekly shopping for 2 adults. We were spending $160pwk. Now we spend $200pwk. That's a 25% jump. Every week, one or two items go up in price.

We have stopped buying coffees, takeaways are now once a month, bought lunches are now once a fortnight, meat is only bought when on special, vegetables are bought from the local market, the car is hardly used. We earn reasonable incomes but boy oh boy we are feeling the squeeze. Netflix will be the next thing we will cancel. Oh and we regret voting labour.

by Carlos67 | 25th Mar 22, 5:14am 1648138447

People will cut their spending not only for pure financial reasons, because they simply don't earn enough but also for phycological reasons and perhaps add to their savings instead so they feel more secure about the unknown as to where exactly this is all heading.

by GV 27 | 25th Mar 22, 7:58am 1648148316

Spark Sport will be next for me, if I can just get F1 Pro directly. Save about $200 a year. Then Sky, given that the rugby has been such a mess and there's less and less on it. So that's a bit more. Won't be taking a holiday this year - that needs to come off my fixed mortgage that's coming off in the middle of winter - not that we've taken a holiday in the last year anyway. So it's going to be a bit of a long slog this year, with nothing to look forward to in the depths of winter.

At some point you have to wonder whether it's all worth it.

by refactornz | 25th Mar 22, 9:52am 1648155162

We don't know what the average income of mortgage holders is because that data isn't published. But it's safe to guess that it's quite a bit higher than the average income of the whole population.

by Independent_Observer | 25th Mar 22, 10:05am 1648155932

Lol - this is the problem.

by Market Interest | 25th Mar 22, 2:11pm 1648170684

"Oh and we regret voting labour."

Don't beat yourself up about it. Do you really thing the other crowd would have done any better? (Spoiler: they wouldn't have.) The whole Western world (barring Sweden maybe and Korea, if they count as Western) got caught up in the same mass formation psychosis for the last couple of years. Now the bill has come due, which it was always bound to eventually.

by Squishy | 25th Mar 22, 12:06am 1648119978

Interesting, borrowers don't seem too worried about rising home loan rates yet.

by Neil21 | 25th Mar 22, 5:06am 1648138002

New house costs are about to go up well above the increase in building costs. New insulation regs and window insulation regs will add 15% to the cost of a new house. Then in 2023, more insulation, then 2025 will see a fantastic new layer of paperwork - Carbon Calculations. This will be the largest white elephant anyone has ever seen.

by Carlos67 | 25th Mar 22, 5:19am 1648138794

Maybe in the longer term in alignment with your dates but in the short term like today there is a definite sense of fear in the housing market now. The auctions are now terrible, huge time gaps between sets of 3 or 4 because the time allowed for bidding is not required when everything gets passed in. You can see the auctioneer just trying to fill time with idle chat and there are more sellers in the room than buyers.

by blobbles | 25th Mar 22, 9:14am 1648152847

Yep, we are wanting to build but have been told the standard spec price the building company is quoting now is $4700 per sqm, up from ~$3000 a year ago. Waiting for the official quote before probably laughing at them and asking for other quotes (which I don't really expect to be any better). In the small ~50 lot subdivision, it was fully sold a year ago and clearly a lot of planning going on, with quite a few homes completed. Now there are about 5 lots for re-sale, a couple with plans attached where they buyer likely can't afford to build anymore.

It's not looking good on the new build front either.

by Jonny.Foe | 25th Mar 22, 8:04am 1648148642

February figures are pretty much always a 20% to 25% bump on January figures. The real story in the figures today is that the number of people taking out mortgages is now at its lowest level since at least 2014.