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.
Mortgage approvals
Select chart tabs
This article was first published in our email for paid subscribers this morning. See here for more details and to subscribe.
28 Comments
These are mainly refinancings from other banks. While the dataset excludes customers that refinance using their existing bank it is still capturing customers switching across to other banks. LIke your past articles point out there is a mortgage war going on, so this sort of activity is high. The series is under development to remove these external refinancings.
Mortgage approvals lag REINZ settled deals, and aren't a forward indicator for increased levels of activity, so people shouldn't read too much as an indicator of residential activity.
Yay, so we're in the same stupid cycle that redirects all investment to unproductive things again.
No wonder this country doesn't create many high paid productive industries and businesses, has house prices amoung the most overpriced in the world, and skilled young people keep going overseas chasing better money.
This government is a total failure.
I'd rather have tax levels at the point where we can actually pay our bills rather borrow a billion a week, and selling off the high earning family silver to boot, trying to save money in ridiculous places, doing things that in the long run will cost us more money.
Just like back in the 90’s when they thought they were smart deregulating the building industry, causing the leaky building disaster, what has that cost the country? 30-40 billion, even more probably.
Face it they don't have a clue what they are doing.
They are the most financially inept government we have had in years, Key is a disaster for the country.
uh no....a lot of the problem can be laid at HC's and Cullen's feet...they had 9 years to cool the housing ponzi scheme. They also had the budget surpluses to sort a lot but chose not to do a thing....so they have left us huge risk...and now JK/we have limited choices.
JK etc has been left a poor hand, simple....though I'll conceed 9 years of National would almost certianly have been little better and quite possibly worse....However look at the UK, or USA or etc etc in really serious trouble....NZ on the other hand has suffered little in 3~4 years compared to many.
regards
JK/we have limited choices.
Wrong. Sooooo wrong.
Key is exercising deliberate and radical choices everyday. Take the $1.1m annually we'll be paying a new "Board" of three crony mates to oversee welfare reforms from the new quango to be established.
Take the increase in prescription charges. Take the increase in classroom sizes. Take the charter schools trials. Take the closing of special needs classrooms. Take the assets sales. Take the p-p prisons. Take the intended increase in pokie machines. Take the increase in GST. Take the fixed increase in EQC levies. Take the extra 2% of salary to be deducted for student loan repayments. Take the changes to student allowances. Take the reclassification of irrigation schemes as 'public infrastructure' as a means to taxpayer fund corporate dairy conversions. Take the proposed changes to employment law/collective bargaining. Take the monopoly position given to Fletchers in Chch.
Chip, chip, chip away at the average citizen - transfer, transfer, transfer to the corporate sector. The direction settting is clear.
Kate you are being too kind - it's got to wholsale transfer proportions - I despair listening to the Key apologists who are equally raped for the benefit of the chosen few.
They are not beneficiaries and yet they seem not to know it. Dogma and ideology tell them they are chosen but they are not. They too have pay and pay dearly they will.
Dear DunDan .........your inquiry should be addressed directly to Bernard or Olly.....whether you will be any the wiser is another thing.
All positions at the moment are speculative on outcomes (Global) that may affect the cost of borrowing and so it gets really complicated...
Tell you what just get the best fixed you can for say 12 months and sweat it out....!
On the upside Australasia just bought a crapload of Spanish bonds ,...so I expect we'll be rolling in it anytime now......rolling in it...(get it..?)
Now don't get all ramped up there Gareth......no story here.....!!! just emphsising the point of connectivity is all...
OK Gareth ...who did buy the current batch ....? who as in the major block.
Well normally in the 5 to 10 range it would be Spanish Banks wouldn't it..?, but you gotta think they'd be a bit over stoking the fire by now....choking on their own debt add Moodys dowgrade to boot.
So maybe the Froggies might be doing their bit as it were and hoping Hollande stays market freindly.........or maybe there's a little of start a fire here to stop a fire there..!
I think this could be so ....yes.??
At an individual level interest rate competition is good for mortgage repayment affordability. At a national level all competition does is create a race to the bottom in lending standards that we saw with sub prime in the US. For the banks it is lend or answer to the shareholders for reduced marketshare and revenue. Reduced marketshare and revenue means reduced salaries and bonuses for executives who pray they will not be around in a couple of years when it implodes. At worst they get fired and take the golden parachute. Bad boy take your $5m and piss off!
Don Brash (not known for his left wing views) commenting on bank executive prudence and decision making said last year,
“Self regulation works provided the people doing the self regulation have their proverbial's on the line. If they’ve got nothing to lose they’ll gamble with your money if they can. So you have to be in a position where you lose your shirt, you get absolutely thrashed…. If you think there is no downside in taking any position you eliminate any caution or prudence.”
He also said “I have some sympathy with the view of Nassim Taleb, the author of Black Swan, who early in 2009 wrote ‘Nothing should ever become too big to fail…Whatever may need to be bailed out should be nationalised; whatever does not need a bailout should be free, small and risk bearing.’”
Seriously, if all this low interest, low deposit lending explodes in the faces of the banks, who will have to answer for it besides the taxpayer in a bailout? All the executives will say is sorry, we were only doing what everyone else was and who could have forseen it. A nice golden parachute eases a lot of damage to the reputation.
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.