More than NZ$1 bln worth of mortgages approved last week for 12th week out of last 13; Strongest run since 2007

By Gareth Vaughan

More than NZ$1 billion worth of mortgages were approved last week, according to Reserve Bank data, meaning 12 of the last 13 weeks - with Easter the exception - have seen more than NZ$1 billion worth of approvals.

The last time the data, which the Reserve Bank has been tracking since October 2003, saw a run of NZ$1 billion plus weeks like this was in 2007 when 19 of 20 weeks from January to June saw at least NZ$1 billion worth of mortgages approved.

All up in the week ended May 11, 6,736 mortgages were approved valued at NZ$1.140 billion. That compares with 5,431 worth NZ$815 million in the week ended May 13 last year. The weekly volume was up 23.1% year-on-year based on a comparison of the most recent 13 weeks of data to the same 13 weeks last year, with value up 43.4% based on the same measure.

During the recent strong run the high came in the week to March 30, 7,245 mortgages were approved valued at NZ$1.302 billion. The low point was the 5,210 mortgages worth NZ$868 million approved in the week ended April 13, which included Easter Monday.

By volume the highest number of weekly approvals, since the Reserve Bank started tracking the data, is 11,193 in the week ended December 15, 2006 and the highest value recorded is NZ$1.542 billion in the week to March 16, 2007.

However, the strong recent run comes with the Reserve Bank saying in its Financial Stability Report issued last week that competition in the banking sector is rising, with banks most noticeably starting to compete for housing lending. Three of the big five banks - ASB, BNZ and Westpac - have been growing home loans with loan-to-valuation ratios above 90% and all the banks have recently cut some of their fixed-term mortgage rates. See more on this here.

Meanwhile, the most recent Real Estate Institute of New Zealand figures, for April, showed nationwide house sales volumes down 4.1% in seasonally adjusted terms from March at 5,676. That compares with 7,330 in March, but was up from 4,897 in April 2011. Monthly sales ranged from 7,000 and 10,000 in the mid 2000s. REINZ said the nationwide median house sale price in April was NZ$365,000, down NZ$5,000 from March's record NZ$370,000 but up NZ$5,000 from NZ$360,000 in April 2011.

The Reserve Bank defines a mortgage approval as a firm commitment to provide credit for the purchase of housing, which has been accepted by the borrower. It says a commitment exists once the home loan application is approved, and a loan contract or letter of offer has been issued to the borrower. Seven banks respond to the Reserve Bank's survey, between them representing 99% of registered bank lending for housing, and about 94% of total housing lending.

Included in the data is the refinancing of other banks customers, any loan where the security changes, and any loan where the liability holder changes. Excluded is own customer refinance, business borrowing where the security is the owner’s home, and when the underlying value of a loan is “topped up," with only the topped up portion included. See more detail in the Reserve Bank's description of the data series here.

Between August 11, 2006 and December 22, 2006 more than NZ$1 billion worth of mortgages were approved for 20 consecutive weeks.

This article was first published in our email for paid subscribers this morning. See here for more details and to subscribe.