New Reserve Bank figures show those looking for their first house are taking up some of the slack left by investors

By David Hargreaves

First home buyers are returning to the housing market in force, according to the latest lending by borrower type figures from the Reserve Bank.

The figures show that in November first home buyers borrowed $897 million to get houses, with the amount they collectively borrowed making up 14.1% of the $6.349 billion advanced by lenders during the month.

It's easily the biggest monthly tally borrowed by FHBs since the RBNZ began reporting these figures in August 2014.

The previous highest amount borrowed by the first-timers in a month was the $833 million figure in May of this year - but that made up just 11.4% of the massive $7.287 billion that was advanced in total that month.

The first home buyers appear to be picking up the slack in the market being left by investors after the introduction of the RBNZ's new 40% deposit rule for investors in October.

The question remains how long the new LVR rules will continue to have an impact on investors for though.

Already in November there was some sign of a bit of a bounce-back with the $1.737 borrowed by investors making up 27.4% of the total borrowed, up from the low-point seen in October of just under 27% (with this figure having been revised down slightly by the RBNZ from the original figure released a month ago).

Going back to June before the new LVR rules were announced, investors grabbed 38% of the mortgage money going that month.

Separately, the Reserve Bank's figures detailing Auckland LVR figures show that in the country's largest city the share of mortgages going to investors dipped below 39% in November, from just under 40% in October and having been up as high as nearly 48% in June.

Auckland of course already had differential rules for investors previously, with the RBNZ having put a 30% deposit rule on for Auckland investors in October 2015.

This rule was replaced by the nationwide 40% investor deposit rule.

The latest figures for interest-only lending show that the proportion of new lending that's on interest-only terms has shrunk slightly again in November, to 35.2% from 35.4% in October.

Prior to the July announcement of the new investor LVR rules, the proportion of new lending being done on interest-only terms was over 40% of total lending.

However, the proportion of interest-only borrowed by investors had a slight uptick in November, rising to 41.9% from 40.2% in October - though as of June this proportion had been as high as 52.5%.

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What proportion, I wonder, of these FHBs would be New Zealand citizens or permanent residents? And what would be the value of the mortgages being written for these FHBs by our newly arrived Chinese banks?

New Zealand salaries and wages have certainly not shown any leap that would account for FHB enthusiasm. The gap between purchasing power and property prices is as large as it has been. All very curious.

Sales down a lot in auckland, I'd guess most the fhb's are in the regions, maybe getting in before rates rise or prices rise further, many regions still going up at 20% annual rates

Okay , so its First home buyers then ....... well there are at least 70,000 new first home buyers arriving in New Zealand every year , ( about 1,400 a week ) so that will keep the market afloat for a while , becasue we are not building 1,400 houses a week

Yes, It has been said before - we need better terminology to distinguish between domestically raised FHB's and imported FHB's

1'400 immigrants per week does not equal 1'400 homes needed, rather 400 homes at 3.5 people living in a house on average

Fair call, but still more than market can deliver so it seems...

Banking is the best 'business' in the world. They are lending $7.287b of money that they do not have , but they can 'create it'. it is $ ... (if i'm right) lets make 5% out of it which is 364.350.000 of interests / year which is over $30 million of interest per months .... generated by this months borrowing. it is just insane. ..

Banking is a little more complicated than you suggest , credit creation and the growth in M3 ( money supply) is very closely managed by the Regulator .

Banks cant just create money , and it would be incredibly dangerous to let them do so , as there would be no incentive to to stop , and they would de-base the currency and cause havoc

Credit creation is managed by the "Regulator" - No, it isn't
Banks cant just create money- Yes, they can
There would be no incentive to stop- Yes, that is correct, hence the explosion in easy credit

So banks take deposits (borrow from depositors) because why?

Not for lending - only to meet help reserve requirements. Its not called FRACTIONal reserve banking for nothing.

Are you sure about that?
Deposits are most definitely taken for lending/funding purposes.
Reserve requirement (absolute terms) is a function of the deposit, not the other way around.

Banks can create limitless new loans but the RBNZ will purge rising liquidity via reverse repos and/or sales of government securities.

Nymad, a bit of information out of the GFC was that leading up to it most banks were operating at ratios in excess of 30:1 loans to depositors funds (capital backing) so yes they are just creating credit out of thin air. Because it is electronic, it is easy to do. They don't actually need a bank note or coin, or for that matter a gold ingot to back each and every loan up. Blame the yanks, they threw out the gold standard, but with technology this would probably be happening anyway.

Where in my comment did I say fractional banking didn't exist?

The regulator cannot force a bank to not accept a deposit. To do so would be counter-intuitive so I don't see how it can closely manage the money supply..
Sure money supply growth can be modelled. However, without a closed economy, it can't be controlled other than adjustments to the fractional reserve rate which is relatively fixed.

To quote you "Banking is a little more complicated than you suggest" and please look up what constitutes M0, M1, M2, and M3 money.


Here is a short quote from' The End of Alchemy,Money,Banking and the Future of the Global Economy', by Mervyn King(formerly Governor of the BOE)- "why the fragility of our financial system stems directly from the fact that banks are the main source of money creation".

exactly. Scroll down to the comment by JTRoberts on this page - excellent summary of why...

"As I’ve explained before manufacturing is a lead loss industry so it sells its product at the cost of production or even a loss but the true profits are made by the Banking and Transportation sectors including wholesale retail distribution. Fourth he convinced the Saudis to sell their oil only in US dollars for unlimited military protection. This expanded to the rest of the OPEC nations. This move created the Petro dollar system that artificially created demand for US dollars. Like economic extortion the oil hungry world had no choice but acquire US dollars with real goods and services so they could buy oil. ..."

ham n eggs, the countries that refuse to use the american dollar have a really bad habit of becoming war zones, eg Iraq, Libya Syria and Iran. So far Iran is safe but if Hillary had got into power she was gunning for them.

Hope it's still pseudo-FHBs like investors weaselling round regulations and foreign students, and not real FHBs getting caught up in the mania.

Has the amount borrowed by FHBs simply gone up with the cost of housing - i.e. the number of FHBs has remained the same - but have to borrow more as property is more expensive?