New monthly mortgage borrowing figures show a strong continuation of the relative honeymoon period first home buyers are enjoying after the Reserve Bank clampdown on lending to investors

By David Hargreaves

The re-emergence of first home buyer borrowing is continuing, with the amount borrowed by this grouping making up more than 16% of the mortgage money advanced last month - which is a new high since these figures have been broken out.

The latest Reserve Bank figures highlighting mortgage figures for April show that the first home buyers (FHBs) borrowed $868 million in the month - which made up 16.1% of the total $5.375 billion advanced in mortgages during the month.

The record percentage share of mortgage lending follows just one month after the FHB grouping racked up its highest numerical borrowing tally of $911 million - although that was (at 15.6%) a smaller percentage of the total.

The Reserve Bank started releasing detailed mortgage-borrower-by-type information in 2014, following on from its first tranche of loan-to-value lending restrictions that were put in place in 2013.

It's the changes that the RBNZ introduced in mid-2016 in relation to investors that have had a real impact on the share of the mortgage figures.

At that time the investors had a minimum deposit of 40% imposed on them and this saw the share of borrowing by investors plummet from around 35% prior to the restrictions to as low as under 21% by December last year.

From the start of 2018 the RBNZ relaxed its restrictions. Investors now have to find a deposit of 35%. And banks now have more leeway to lend to first home buyers and owner occupiers who have deposits of less than 20% (high LVR loans). The amount of high LVR new mortgages the banks could advance was increased to 15% of their new lending up from 10% previously.

These relaxations could have been expected to benefit both investors and particularly the first home buyers (who tend to have the smaller deposits) - and that seems to have been what's happened.

The share of borrowing by investors has lifted from the low of under 21% before the end of last year to 23.5% now over the past two months. However, that's still a long way down on the sorts of numbers being recorded by this grouping prior to the mid-2016 changes.

But at the moment the figures are really about the FHBs and how they have been let back into the market, having seen their share of borrowing down below double digits prior to the RBNZ putting the clamps on investors.

For example the $868 million borrowed by the FHBs last month compared with just $630 million in the same month last year and $789 million in April 2016.

Now of course at this time of year overall figures get affected by the timing of Easter, so, a more meaningful comparison is to look at what the FHBs overall share of the borrowing was.

As mentioned, in April 2018 it was 16.1%, in April 2017 it was 13.8% and in April 2016 it was just 12.1%.

What the latest trends mean for whether the RBNZ will consider further relaxing the lending requirements is a key point.

The RBNZ puts out its latest Financial Stability Report (FSR) next Wednesday. It's in these reports that such measures as loan restrictions are normally addressed. Indeed the January loosening of the LVR clamps was announced in the last FSR in November.

The current borrowing patterns would probably suggest the RBNZ will be happy to sit and wait for another six months before moving again to further relax the LVR rules.

The central bank would not want to risk reigniting the market at a time when the construction industry is still struggling to make an impact on housing shortages, particularly in the Auckland area.

 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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61 Comments

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".. the figures are really about the FHBs and how they have been let back into the market .."

That made me laugh. I'm a renter and considering moving to Perth for better accommodation, weather, petrol prices, power prices, etc. As for FHBs being "let back into the market" - you can keep your rot-box market lol. This "market" is clearly your precious, would hate to touch some rotted out villa or dog box apartment that didn't belong to me.

Sorry, I just can't stop laughing - It's like these property owners are hoarders with piles of what is clearly junk, but to them it's worth a fortune - OMG it's so funny I'm almost crying lol.

The NZ Property Empire's clothes are moth eaten lol
Naked, Naked I tell you !! - you'll catch your death out there lol

Good on you Zack. Auckland is a nice city if you are well off, but for most it is a huge slog with its horrendous cost of living. Australian cities such as Brisbane, Perth and Adelaide provide at least as nice quality of life and are much more affordable (housing, fuel, power, groceries)

Definitely even Sydney by comparison with it's higher wages, more jobs, transport, better food (and lower cost of food), and similar housing (yet with the better transport further out becomes a markable lower cost of housing for a similar travel time) is positively the land of opportunity & beauty, (think of the still remaining environmental wealth they have), compared to Auckland & rest of NZ (sorry assumed for some reason you were looking in Akl due to job incidence & greatest shift in prices in past few years)... Really sad that in NZ the employment market especially in STEM fields has steeply gone downhill over the past couple of decades so most graduates move away, (or leave STEM work behind). Perth at least has jobs for NZ STEM fields. The housing market is another factor to add to the heap of reasons to leave. Such a pity for younger NZders.

Enjoy Perth

FHBs should steer clear when the RBNZ considers the risk of needing unconventional monetary policy tools as 'higher than it ever was in history'. Surely asset prices would need to be hemorrhaging to warrant the use of such tools. Although, TTP will argue the RBNZ are completely clueless and it's never a bad time to buy that dream home.

When the tide goes out very quickly, and way out to sea? It's sure sign of an impending tsunami. Never mind the scenes of nudity.

Alas, when the tide comes back in (which it always does) the nudes disappear.........

TTP

That's absolute rubbish, Retired-Poppy. When have I ever suggested our central bank is clueless?

I have a great deal of respect for the Reserve Bank of New Zealand, which I believe has provided an excellent service to NZ since its establishment in 1934.

I think Adrian Orr is a worthy new Governor - following in the steps of Alan Bollard and Graeme Wheeler. (Grant Spencer was also highly competent.)

You need to know that RBNZ has always kept abreast of different approaches to monetary policy - both conventional and unconventional. That's a key part of its mandate - carried out by a team of talented and skilled economists/econometricians.

Finally, it's you that used the expression "dream home" - not me.

Retired-Poppy - you are far more full of yourself than sure of yourself.

TTP

Wrong, it was you that said it was always the right time to buy that dream home. Here you go again flip flopping and now claiming I said it? If you did respect the voice of the RBNZ officials you would cease peddling real estate as being great value for money at current prices.

Hi Retired-Poppy,

As you keep re-editing your responses, they become more and more misleading - and desperate.

As you've been told before, "When you're in a hole, stop digging."

TTP

ha-ha-ha :), if editing out my bad grammar is a crime, I plead guilty. If you think Ireland is part of UK, you've already dug yourself halfway to China!

Who else saw the RBNZ announcement and Westpac boss comments and thought about moving their money over to HSBC to avoid the OBR??? X-D X-D X-D

We have money parked with Rabobank that's covered 100% by its parent in Netherlands. All interest earned from it is also covered. No OBR concerns. Parental cover ended for new deposits in 2015.

Do you know if that's the same as RaboDirect's offerings here in NZ?

Hi Zack, yes we're with RaboDirect.

.

https://www.rabobank.co.nz/media-releases/2015/150501-rabobank-new-zeala...
Rabobank is not covered by the Netherlands parent anymore. That changed and they have to stand on their own two feet.

"Under a series of guarantees, the Rabobank group parent entity guaranteed all the Bank’s obligations. Each such guarantee has now expired, except that all obligations incurred by the Bank while a guarantee was current and before the guarantee expired remain guaranteed until those obligations are repaid. The only obligations that remain guaranteed are therefore obligations that were incurred before the close of 30 April 2015 and that have not subsequently been repaid e.g. a deposit obligation incurred before 30 April 2015 will have been repaid (and the deposit obligation will have ceased to be guaranteed) if the deposit is paid into an account with another bank. Based on the above, material obligations of the Bank are guaranteed as at the date its directors signed this Disclosure Statement. All new obligations incurred by the Bank after 30 April 2015 are not guaranteed."

Where:
- “Rabobank” refers to Coöperatieve Rabobank U.A., incorporated in the Netherlands.
- and “Bank” or “Banking Group” refers to Rabobank New Zealand Limited.

The loss of the guarantee meant the ratings took a slight drop.
http://www.stuff.co.nz/business/10619806/Rabobank-NZ-faces-ratings-downg...

Hi gingernninja, I have been thinking about how to avoid the OBR. Are you sure HSBC NZ is not covered by this? Not that HSBC has a stellar track record, are they part of a guarantee scheme?

Mrs The Point re; the OBR.

IMO HSBC, much like a cockroach, will be the last bank standing after the apocalypse. I don't love them, but they survived the GFC without breaking a sweat and I think they are the least likely bank in NZ to ever go in to liquidation. HSBC is small fry in NZ, it's a tiny market, but they would never risk their global reputation as one of the biggest and safest banks in the world, by letting NZ HSBC go into liquidation.

Unless a bank fails, an OBR will never occur. I would put my money on HSBC as the least likely bank in NZ to ever fail.

Zack Brando, if you think everything is rosey in Perth then I suggest you do a bit more homework!

The Man 2, you can buy a house for a song in Perth. We know people whose houses have been on the market for 5 years **FIVE YEARS** in Perth and still not sold.

Ginger ninja, where did I mention about the price of houses.
What is the reason you think that the houses are so cheap?
Perth is not all you may think it is!
Quite a boring place really and so isolated!

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Christchurch is pretty boring and more isolated

Sure is. Just came back after a few days for work and couldn't wait to get out!

Perth has more people than Auckland and is a few hours away from Asia. The idea of it being called 'boring' by a man fluffing up property in Christchurch - a glorified provincial town - is hilarious.

Why would you want to buy a house that you cannot sell?

Calm down guys. I wasn't suggesting Perth was a good idea! Just saying that there were some houses going cheap and some desperate sellers.

I mean, I don't know if now it a good time to buy in the Perth market, i've not crunched the numbers and done the research on that, but generally, when a market has bottomed out, it can be a good time to buy, unless some major structural factor means the market will never recover.

If you can earn a respectable income and afford to buy in Perth, then maybe that seems more tempting than being a serf in NZ for the next 30 years?

Gingerninja.

Perth is only for those that really want to live there because they really like sun and shark watching.. The Chinese no longer need Perth for its resources, they can get everything they need out of Africa for the foreseeable future (out lifetime anyway). And anything they don't need from Africa they will sell to everyone else for less than the indebted Aussies will ever be able to provide it for.

Best Nic

That's a touch harsh!
It's quite a nice city. It's also much closer to Europe than the rest of Australasia

Fritz that's brilliant, so the benefit of Perth is that it is closer to Europe.. Who'd want to be in Australia anyway when Europe is so close.. What do we do about Auckland? That's miles away from Europe and is also coming off a debt binge...

You are so right Fritz. Perth is also much closer to Madagascar. Gotta love those Ring-tailed Lemers.

It's all very personal isn't it, and depends what you are into. I'm from Perth originally. Personally I think its all beaches and shopping malls, and yep, very isolated, not just from the rest of the world but the rest of Australia. Perth's weather is good. Personally I do find it boring, despite the great beaches.
If you love mountains, rivers, alpine activities, well Christchurch has lots of that nearby. Once Perth has bottomed out (maybe it already has, don't know), if you like that kind of lifestyle, then it should be a safe enough place to buy a house but the capital gains achieved during the mining boom are obviously likely to be a thing of the past.

Do you know anything about geography? As well as being much closer to Europe than NZ it is also much closer to Asia (and Africa). So for kiwis to say Perth is isolated is a load of....
If you love travel (as I do) then NZ's isolation is quite disadvantageous. If you don't like travel then I guess NZ's isolation isn't an issue

.... what about the penguins :-)

I think you are about to find out.. You weren't in it purely for capital gains were you Evil?

That happens sometimes when people buy a home.

They are neglectful to not consider they are actually beginning the climb on the property ladder, that at bbqs they will have to discuss where they reside on aforementioned ladder, and bluster own about how incredibly rich and smart they are. Its absolutely ridiculous that people think houses are for living in when everyone knows they are in fact perpetual motion moneymakers.

It doesn't have to be perfect, just better than here.

Even in the midst of a mining bust, Perth still has loads more opportunities than the likes of Wellington or Christchurch - which are it's competition in terms of Australasian house prices.

FHB human shield? ie Interest rate policy has, up until now, been all about inflation but that could change!

The desperate fhb club, like sheep they trott off to the bank hand in hand with unbridled ambition clouding better judgement.

Fritz, how,on earth can you say that a Chch is boring?
It is far from that and we have had that many shakes that has kept the adrenaline going since 2010!
Personally a huge fan of Chch as it offers plenty, and that is why people are flocking into Chch now and will continue to do so in the future as it continues to develop!
I would be a helluva lot more comfortable investing in the Chch houxing market than any other market in the country as it is going to be the most modern city in Australasia.

arrrrrrr .. no.

Perhaps Chch was nice before the first set of earthquakes, but can you really say it has recovered after the second set? In many ways clients who shifted both to and from Chch all have one thing to say about is and that is that the recovery has not gone well and there is still a lot of work to do before it is back to a similar level before the earthquakes. Sadly the CBD was rather nice,... but not now, no. The recovery was a complete bollix, for businesses and residents alike. However now hopefully the flow will go back into Chch but the way they are designing the city it would be a poorer option to Wellington, Tauranga, Hamilton or even Dunedin. That being said it still has a University to draw in younger crowds, and is trying to draw in tourists still, (the more important population in the council eyes). But splurging on a white elephant stadium that costs a bomb to upkeep & cover running losses with the water issues Chch currently has? Those poor poor ratepayers.

Every effort should be made to ensure that FHBs are not the losers in the future of the housing market. The beauty of the current situation of rising house prices for ever and ever is that it is a win-win situation.

Often when a house sells there are congratulations to both the seller and the buyer. The seller has made some money and the buyer has bought a home that will also continue to be a good investment. This is how I have always viewed it.

If the market becomes a winner-loser situation we know that things are seriously wrong. The government needs to act responsibly so that a win-win environment continues.

This is why I am quite contemptuous of many comments found here that appear to be gas-lighting for an expected crash and housing market apocalypse. It is terribly irresponsible and unnecessary.

Except its not a win if your buying a house not for an investment - but as a home. With ever increasing prices where is the 'win' when you cant afford heating, or to put food on the table. Where is the 'win' where an ever decreasing number can afford shelter?

This is win for me and FHB, houses cost 10 dollars. I sell my house to FHB for 10 bucks then buy another house for 10 bucks, I'm happy and FHB happy, no debt and heaps of disposable income for other things. Sweet.

The beauty of the current situation of rising house prices for ever and ever is that it is a win-win situation.

Bubbles are ultimately bad for everyone in the long run. If you can point to one successful asset bubble that has enriched the hoi polloi, feel free to to identify it. You can't because it's never happened.

I'm not sure you have really thought through the implications of what you have written. And I'm quite contemptuous of people trying to make out that they have concern for others when they are really only interested in themselves. If you think markets are always win / win situations then you can't believe in the free market. Markets go up and markets go down or are you a closet socialist. Why the government should get involved in a free market economy is beyond me - I though everyone loved neo-liberal economics or is that only when they are winning.

The free market almost always has a win/win outcome. That is like the essence of a free market. Just because a market has gone down doesn't mean you have lost in the long term.

You guys seem to have a very fundamentally flawed attitude regarding these things.

In the context of financial markets (and I include property in that) when you say “win win”, I think you mean “boom and bust”

"almost always" - them's is weasel words. In your original post you don't use a qualifier. While I don't disagree that in the long term generally the outcome will be positive - sometimes people can't get to the long term because something else gets in the way - job loss, change in circumstances etc, etc. Event then you may only get to a point where you back square in nominal but not real terms. The "win/win" view could be considered an academic / idealistic economits's view.

You seem to have a "very fundamentally flawed attitude" toward what could and can happen. You seem to dismiss other's views as if you have some "enlightened view" .

Not everyone believes the same thing, not everyone thinks the same way.

Sorry what you just said is incredible.

It’s people like you that are dangerous

Sorry what you just said is incredible.

It’s people like you that are dangerous

Yeah that was my sentiment also. Dangerous nonsense. It’s difficult to credit that there are otherwise rationale people who think this way. I really struggle to see what’s makes house prices at 9x average incomes in Auckland a desirable public policy outcome. Unusually elevated house prices induced by a credit bubble are an economic drag and a social blight and do nothing for our national well being, socially or economic. We should neither induce nor prevent price falls. The policy focus should how we best manage falls (or at least the consequences of falls) in real term house prices, as this is both a desirable and seems to me inevitable eventual outcome.

The market can remain irrational longer than you can put off having children.

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That's okay. New Zealand doesn't need locally made children anymore. We can import cheap junk from China instead like we do everything else.

Free money for life.....No such luck....Congratulations....I do not think so.

https://www.themaven.net/mishtalk/economics/cash-out-refis-10-yr-high-pr...

Who wants to be a Trillionaire....USA don't.

Credit where credit is due.....Cash box houses,..post card debt...what can possibly go wrong.

To infinity.....You say....I say....nuts...crackers and a free lunch...just ain't gonna happen.

We left AKL to SYD a long time ago and have never looked back. I would never want to live in AKL ever again. The cost of living is extortionate, much more than SYD and the houses prices are about on par yet the salaries are so much lower. Add that to the weather, the public transport and the general livability and vibrancy and its not a patch on SYD not even close. Why buy a place in AKL on Struggle Street doing the AKL daily grind for years and years wasting your life on such sub standard living.

Chch rebuild has been slow in the CBD but is is ramping up now.
Thing is that it will be the most modern city in Australasia and the most desired.
Affordable housing, lovely people and opportunity!

I always thought most desired has the most population and the highest house prices as you would pay a premium. Queenstown is small though but house prices are definitely saying its desired.

Let back into market they say.. are people actually signing up 500k++ (depending on location) of pain for these 3 bed dumps?? They all seem to headline "Got Potential" New to commenting in my search for facts on the ground..which is not going well when the media publishes so many opinion pieces and REAs try and drum up sales with passing comments.