By David Hargreaves
The amount borrowed by first home buyers last month hit the highest level since the Reserve Bank started releasing detailed mortgage-borrower-by-type information in 2014.
The latest Reserve Bank figures highlighting mortgage figures for March show that first home buyers (FHBs) borrowed $911 million in the month - which beat the previous high by this grouping of $897 million in November 2016.
The noteworthy thing about the rise of the FHB borrowing is that it's occurring at a time when overall new mortgage figures are much lower than they were, particularly before the RBNZ put 40% deposit limits in place for housing investors in the second half of 2016.
In recent times the share of the new mortgage borrowing of FHB's has been generally rising, from under 10% during the real market boom times to a recently fairly consistent 15.5%.
For example, if you look at the March figures going back to 2015, in March that month the FHB's mortgage borrowing (at just $596 million) made up under 9.5% of the total advanced in mortgages. In March 2016 that share had risen to nearly 11.5%, by March 2017 it was 13.7%. Then, in March 2018 it was over 15.5% of the $5.852 billion that was borrowed by all borrower types in the month.
It will be worth looking at the trends over the next few months, however.
In January the RBNZ relaxed the loan to value (LVR) restrictions. This meant the deposit limit for housing investors was reduced to 35%, while the amount that the banks could lend on high LVR loans (above of 80% valuation) was increased to 15% of their new lending from the previous just 10%.
The expectation from such changes might be to see more FHBs in the market - which appears to be happening - as they are most affected by the over 80% value high LVR lending tweaks.
Also, however, the changes were always likely to be an interesting litmus test of the appetite for investors to get back into the market.
Before the 40% deposit limit was clamped on to investors they were galloping away in terms of their share of the mortgage market, with an over 35% share of mortgage borrowing nationwide and rather higher than that in Auckland.
Subsequent to the deposit clamps being put on, however, both the amounts borrowed (which had exceeded $2 billion in many months) and the share of total borrowed had plummeted.
In December 2017 investors borrowed a little over $1 billion, which accounted for less than 21% of the total borrowed that month - a long way down from the nearly $2.4 billion (just under 35% of the total) borrowed by investors in June 2016 shortly before the RBNZ clamped down on deposits.
However, since January, there has definitely been a discernible rise in the amount borrowed and the share of the market for the investors.
In March investors borrowed $1.373 billion, which was the highest amount borrowed by that grouping since May last year.
Now, of course, that's seasonal to a fair extent. But the proportion borrowed by the investors has definitely increased.
The March investor mortgage figure made up 23.5% of the total borrowed, which is the highest proportion of the total borrowed by this group since June of last year.
The 23.5% figure in March compared with 22.2% in February 2018 and 21.2% in January 2018.
While it might have been expected that the investors' share of the market would increase with the relaxation of the deposit limits from 40% to 30%, it is to be imagined that the RBNZ will be keeping a close eye.
The RBNZ has indicated that it will look at further relaxation of the LVR limits - but only after being satisfied that the housing market is not taking off again.
If anything, the latest mortgage by borrower figures may well encourage the RBNZ to wait some time longer before looking at further relaxation of the LVR rules.
The next logical time the RBNZ might have looked at further relaxation of the LVRs would be at the end of next month, when it releases its latest six-monthly Financial Stability Report.
While the latest mortgage figures for March - which in total show around $100 million less borrowed than for the same month a year ago - certainly don't show a housing market reigniting, the RBNZ's likely to be very cautious about further relaxation of the LVRs till it is absolutely certain there won't be an upward resurgence.