By David Hargreaves
The level of household debt taken on by Kiwis rose at its fastest pace last month since November 2007.
The RBNZ's monthly sector credit figures for July show that total household claims (mostly mortgages, but also including consumer finance) rose a seasonally-adjusted 0.9% to $238.432 billion (from upwardly-revised $236.791 billion in June).
This is the fastest monthly rise since the 1% gain recorded in the month of November 2007 when the previous housing boom was just starting to tail off.
In terms of just mortgages, the total in July rose to $223.052 billion (from $221.42 billion in June), and is up 9% in the past 12 months.
That's the biggest rate of annual growth since May 2008.
Nearly $18.5 billion was added to the country's mortgage bill over the past 12 months.
The RBNZ watches these figures closely, so will be concerned at the continuing increase in the rate of mortgage borrowing.
The new LVR restrictions to be placed on housing investors were announced by the RBNZ on July 19. Whether there has been therefore something of a surge in the latter part of the month to 'get in' before the introduction of the rules will become more apparent over the next few months.
Clearly the RBNZ will be hoping the new LVR rules will see an easing in the rate of credit growth.
New figures in the RBNZ's Key Household Financial Statistics series are due to be released next week.
The latest available figures for the March quarter showed that household debt had now risen to a record high 163% of disposable income.
It's almost certain the figure will be now higher than that, given the way borrowing has surged in recent months.
At the moment the costs of servicing the debt are comparatively low because of the low interest rates, but whenever interest rates do eventually start to rise, this would hit repayment levels quite quickly and could generate stress for heavily borrowed households.
ASB economist Kim Mundy said housing credit had "yet another strong month", by growing over $1.6billion in July.
"However, it is slightly down from May’s stellar $2.1 billion increase and June’s strong $1.9 billion lift."
Mundy noted that the 9% annual growth rate in the mortgage total was only around half of that seen at the peak of the previous cycle.
"We are expecting housing credit growth to slow from here on out, however, as the new investor LVR restrictions take effect.
"Current RBNZ mortgage approvals data for August are hinting of this, as they are showing a slowing in activity. Further, for the first time in 8 months, investors did not gain a higher share of all new lending. Nationwide, lending eased back very slightly to 37% (was 38%) and fell 2% pts in Auckland, to 46% of all new loans.
"We would expect to see the share of new lending to investors to continue to ease over the coming months, as the new LVR restrictions limit the amount investors can borrow."
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