Debt still rising

Property

Household borrowing comes close to the $200 bln mark, according to RBNZ figures

31st Oct 13, 3:42pm by David Hargreaves

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

Household borrowing is still rising and at current rate of progress may have topped the $200 billion mark this month.

Figures just released by the Reserve Bank show that total household claims - that includes mortgages and consumer borrowing - were $199.047 billion as at September, up from $198.133 billion in August.

On a seasonally adjusted basis the latest month's figure was 0.5% higher than the previous month's and the same rate of increase that prevailed a month earlier.

Household debt is now rising faster. Before this year you had to go back to March 2008 to see an increase of as much as 0.5%. But to put the current figures in perspective, debts were increasing by as much as 1.5% a month back in the early 2000s.

On a year-on-year basis, the latest month's figure was up 5.6%, the biggest increase since October 2008.

In terms of just the amount outstanding on mortgages, this stood at $185.846 billion, up from $185.030 billion in August. The year-on-year increase was 5.9%, again the highest rate recorded since October 2008. But again to give perspective the rate of year-on-year increase actually peaked at 17.5% in 2004.

Borrowers have continued to rush to fix their mortgage interest rates.

As of September some 56.01% of mortgage debt was fixed, versus 43.99% floating. In August the ratio of fixed to floating was 54.96% to 45.04%, while 12 months ago just 42.36% was fixed and 57.64% was floating.

Elsewhere, the agricultural sectors' borrowing patterns seem to have settled down after some wild fluctuations earlier in the year caused by the drought.

Agricultural borrowing stood at $51.833 billion in September up from $51.710 billion in August, with the year-on-year increase at 4.2%.

Likewise, business borrowing has been volatile at times this year and has not always appeared to bear out the consistently high confidence levels expressed by businesses in surveys.

As at September business debt was $79.855 billion, up from $79.183 billion in August, with the year-on-year increase at 2.1%.

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11 Comments

by Andrewj | 31st Oct 13, 4:23pm 1383189788

Thats how banks make record profits, 'grow the debt'.

by Justice | 31st Oct 13, 5:59pm 1383195571

EXACTLY! Funny how not one single economist in the media ever highlights this very simple observation

by MikeM | 31st Oct 13, 9:09pm 1383206954

And when they're struggling to grow debt they cut costs and loan loss provisions instead. This way they can still boast about how well they are doing despite not achieving any organic growth. ANZ displayed a fine example of this with their earnings report this week.

by 2 Tooth Bora | 31st Oct 13, 5:36pm 1383194169

Thats is the root problem with the cost of housing!

Not land supply but debt supply.

People competing against each other to buy land in NZ for as much money as one can borrow from overseas.

The banks have had free range after the GFC with super low interest rates pushing house prices to dizzy heights.

A Joy Division song comes to mind "Shes Lost Control Again"

by Roger Witherspoon | 31st Oct 13, 7:19pm 1383200391

The Reserve Bank have lost the plot - maybe that should be an answer to your survey.

Why to I think this? Well, On a year-on-year basis, the latest month's figure was up 5.6%, the biggest increase since October 2008.

I get nominal GDP growth at 2.07% per annum from here:

http://www.interest.co.nz/charts/economy/economic-growth

So congratulations to the RBNZ for enabling debt growth at 2.7 times the rate of nominal GDP growth. This is an appalling result, an overindebted country is getting deeper into debt at an increasing rate. How is it that such intelligent and well meaning chaps can only manage this. Am I just expecting them to perform the impossible? Are the central bankers just the modern equivalent of Gosplan in the USSR?

by Gummy Bear Hero | 31st Oct 13, 7:32pm 1383201131

.. you're right there , Rogie ... as long as we keep interest rates low we encourage borrowing and the property bubble , and we reward the Ozzie banks with stellar profits ..

And we punish Kiwis with savings in cash instruments ... That is just so weird , so back-to-front , so imprudent ....

... as Stephen Hulme said , the savers of this country are effectively ( indirectly ) subsidizing the borrowers .. .. as if we're removing the baked beans and tinned cat-food from out of the toothless mouths of our elderly retired folks ... leaving them starved , and bereft of grannie nappies ....

by MikeM | 31st Oct 13, 9:19pm 1383207590

To add insult to injury, the savers have their funds put at risk by the banks so they can avoid any significant equity contribution of their own. The result is poorly capitalised banks taking risks with almost 100% unwittingly coming from other parties. But that's ok because those same savers will then bail out the banks via Aussie (and possibly NZ) government promises if it all goes belly up. No worries eh.

by notaneconomist | 31st Oct 13, 8:42pm 1383205345

I think they have been reading this

http://www.rbnz.govt.nz/research_and_publications/reserve_bank_bulletin…

by goNZ | 1st Nov 13, 4:19am 1383232785

anz and co must be larfing their heads off at all the kiwi suckers signing up to fixed rate mgages at north of 6%, while the banksters borrow offshore at 2%

by Alter Ego | 1st Nov 13, 8:03am 1383246211

And the Banks borrowed the 2 % from our friends...the YANKS.

Then they tax you to get it back.....on top of the 6% you committed your lifes work to.

I had this in an American based email...but it equally applies here.

The Nation's Full Faith and Credit Card

Richard W. Fulmer

Imagine that everyone in your community is issued a credit card with the same account number. At the end of every month, the bill is totaled and divided equally among you. Suppose that during the first month, you choose not to use the credit card, yet you receive a bill for $100. The next month, you purchase $100 of goods with the card just out of self-defense. Unfortunately, your bill that month is $500.

By now you realize that the only way to stay ahead is to charge at least as much as the group average. So the next month, you rack up charges of $1,000. But this time, your bill is $2,000. Clearly, everyone else in the community has been hit with the same realization. Now it's off to the races, and everyone quickly spends themselves into bankruptcy.

In desperation, a town hall meeting is called, and everyone agrees to cut up his or her credit card. Unfortunately, some people cheat, and the bills keep coming. Worse, those who cheat are the ones with the biggest incentives to do so -- the people who bought the most when everyone still had a card and others who have become dependent on this communal "welfare system."

Finally, the town elders meet with representatives of the credit card company and convince them to cancel the remaining cards. For years, however, the town's citizens must work to pay off the mountain of debt that they piled up during those months of shared insanity.

The scenario just outlined is very much like the one in which we now find ourselves.

Fractional Reserve Banking and TAXING.

Taxing...aint it. Yes...very taxing.

A lifes work this scam.

And you fell for it.

by Roelof | 1st Nov 13, 9:22am 1383250975

money debasement has been going on thruout history.

in the old days it was easy to see.... just weigh the coins and see the difference.

In todays world of Fiat money it is not so easy....We have been mesmerized into believing that the CPI is the equivalent to a "weighing machine"..

It is not.... at all... The CPI is subject to all sorts of forces... which can disconnect it from that which it is supposed to measure ( weigh )..

Thus.... in the last 30 yrs we have experienced one of the greatest Monetary debasements ...without even realizing it.... ( thou we intuitively know that Real Estate is a far better "store of value" than is money on term deposit .)