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.