By David Hargreaves
The annual rate of growth in the total outstanding in mortgages increased last month for the first time since late 2016.
The rise follows the the stabilising of the growth rate in the previous three months following over a year in which the annualised rate of growth in mortgage borrowing had slowed month-by month from a peak rate of 9.3%
The latest Reserve Bank figures monitoring sector credit show the amount outstanding on mortgages as of April was $248.51 billion compared with $247.377 billion in March, which resulted in an annual growth rate of 5.9%. Those figures include both banks and non-banking lenders.
The latest month's figures mean the annual growth rate blipped up to 5.9%, from 5.8% as of the previous month.
The 5.9% figure is the highest so far this year.
While obviously the slight blip up is not much of a rise and the current level of growth is well below what it was up till quite recently, the latest figures follow on closely from the RBNZ on Wednesday stating in its latest Financial Stability Report that the financial system’s vulnerability to household debt has not changed materially since the previous FSR.
"Ultimately, continued stabilisation, or a further reduction, in the growth rates of household debt and house prices, will be required before the risk to the financial system is normalised," the latest report said.
The RBNZ made no further move to relax the loan to value ratio (LVR) restrictions and Governor Adrian Orr said the central bank would be waiting "at least" till the next FSR is delivered in November before there's any possible further relaxation.
The RBNZ closely watches the rate of credit growth and while it will not have seen anything to particularly concern itself with the latest monthly figures, the slight rise in mortgage borrowing growth rate if continued for any period of time is likely to dampen any prospect of the the central bank moving to further relax the LVR rules this year.
The rules were relaxed a little from January 1 this year and the mortgage figures have shown a slight move upward since, particularly from first home buyers and from investors - albeit that the investors' share of the overall market had plunged from the last significant tightening of the LVR rules in mid-2016.
ASB chief economist Nick Tuffley said the "resilience" of housing credit growth is justification for the RBNZ to wait further before easing the LVR restrictions.
"The housing market is in a healthier state than in last November, when the RBNZ decided to ease the LVRs slightly," he said.
Elsewhere in the latest sector credit figures, the rate of annual growth in consumer borrowing, which surged to as high as 8.5% early this year, declined again last month, down to 7.1% from 7.5% as of March.
Business borrowing, at $109.141 billion as of April, was up from $108.527 billion in March, however, the annual rate in growth slipped to 4.1% to 4.6% and it has generally been dropping since the new Government came in, which would square with the lagging level of business confidence seen in surveys.
"The continued slowdown in business credit growth needs watching," Tuffley said.
"Business confidence has not recovered much ground since the new Government was formed, and has starting weakening again. There is a growing risk that the post-election patch of slower growth extends into the second half of the year."
Agricultural borrowing, which continues to be an area of concern for the RBNZ, was not much changed in the past month, with the total borrowed at $60.762 billion down a little from $60.793 in March and the annual rate in growth down slightly at 2.6% in April from 2.7% as of March.