Total monthly mortgage borrowing figures dropped sharply in June, while the first home buyers had their smallest share of new mortgage lending so far this year

Total monthly mortgage borrowing figures dropped sharply in June, while the first home buyers had their smallest share of new mortgage lending so far this year

By David Hargreaves

The onwards-and-upwards march of the first home buyers ended abruptly last month, with the FHBs enjoying their smallest share of new mortgage lending so far this year, according to new mortgage lending by borrower type figures compiled by the Reserve Bank.

While the $803 million borrowed by the FHB grouping in June was up nearly $100 million on the figure for the same month a year ago, the amount borrowed in the latest month represented just 15.1% of the total borrowed.

That's a sharp fall from in May when the FHBs borrowed $1.116 billion,  making up some 16.9% of the total.

The RBNZ has only been releasing the lending by borrower type figures since August 2014, so, it's difficult to get a historical handle on borrowing by the FHB grouping.

But we do know based on the existing series that both the amount borrowed by FHBs in May and the share of the total were at record highs since the RBNZ started releasing these figures. 

So, the latest month's sharp drop in the amount and share of borrowing by the FHBs was an abrupt end to what had been a virtually constant rising trend really dating back to when the RBNZ put clamps on investor borrowing in mid-2016.

Overall mortgage borrowing dropped sharply in any case during the month, with the total borrowed falling to $5.305 billion from a nearly two-year high of $6.592 billion in May.

Compared with June a year ago the total amount borrowed was up, by 4.1%, however, that's a much slower rate of growth than seen just recently and well down on the 9.2% growth recorded in May when compared with May 2017.

Investor borrowing, which has stabilised after dropping sharply through late 2016 and 2017, remained at pretty much the same level of market share, with the $1.257 billion borrowed by investors in June making up 23.7% of the total - the same as in the previous month.

The latest figures might actually be of some comfort to the Reserve Bank, which slightly loosened the loan-to-value-ratio lending restrictions from the start of this year.

The central bank has indicated that any further loosening of the restrictions will not occur at least till its next Financial Stability Report in November.

With the way the overall figures had been climbing this may have been making the RBNZ think twice about any further relaxation of the rules at all this year.

But the latest figures could suggest that perhaps after some releasing of pent-up demand in the early months of the year, the demand for mortgage money is now easing.

However, one month is just that - one month. And the RBNZ would want to be certain that there is no sign of the housing market taking off again before it does decide to further relax the LVR rules.

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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43 Comments

Back Off, or Backed Off!
Anecdote: Son bought starter home ChCh outer suburbs in 2014, $285k. Wants to upgrade and advertised his place in March for $329k. Two offers over 4 weeks by FHBers. Both fell at the 'Subject to Finance' hurdle. No offers since. So he's not moving, and also not buying....

So one less second time buyer in the market place. That's a shame for your son but he'll probably move in a few years time for a much narrower differential as the upper ends will correct far more in cash terms over the next couple of years than his will do. He may have just had a lucky escape.

Why would FHB be rushing to purchase now? They are all queuing up for the Kiwibuild lottery!

Not at all surprised that FHB's are steering clear , they have gone onto the lottery draw for a R650k house, circa 40,000 of them for the first 1,000 houses ...........silly buggers

We have many issues to overcome , such as

Affordability , the banks assessment of your ability to pay
Deposit , saving $200 k is a big ask
Overheated market , speaks for itself

I would suggest the speculators have started buying again , they have realized the Government is all hot air about Kiwibuild/ buy / rent /offplan, banning foreigners , making land available , build 100,000 cheap and nasties , lifting the ban on imported high quality kit-set houses from Germany , etc etc

15
up

$200k? are we up to 30% deposits now? You just can't help yourself with throwing shade at anything Labour does can you?

Boatman you are correct. This government are now having cold feet as ban on foreign buyer which was their flagship promise still not passed after 10 months as hiding behind comittees.

Now even if they do pass after delay will dilute it and will not impliment immediately (Whatever is left of original amendment) and will be from October or some other months giving time to speculators and foreigners to exploit.

Do you actually know what’s involved in the foreign buyer ban? I don’t, but I would take a wild guess and say it’s not as simple as taking out a full page advert in the newspaper.

Not as simple at the same time not that difficult also if have will.

I’m going to assume there’s more involved than drawing up a 100 page document. They may need to consider what provisions within other legislation need to be rewritten to avoid any legislative contradictions.

Also, whose job is it to sort this out and what other duties are they required to fulfil day to day? People need to come down to earth and realise not everything happens overnight in this “instantaneous” society we live in today.

I would prefer they take their time and get things right, than to implement it in a hurry and then regret it. No other government had the guts to venture into this territory, so kudos to them

No doubt they’d be lambasted if they worked to the expected timeframes of many commenpotatoes here if it all turned pear shaped. “Oh COL why did you rush it? Amateurs”

There's quite a bit of legal stuff to get around especially the FTAs we have signed. I bet they can't get around the China deal and not banning them will make it completely ineffective. This has taken so long now and not moving. I'm getting seriously pissed off with this govt. Nats were arrogant bunch who refused to acknowledge we had a foriegn buyer problem and this lot is completely incompetent to resolve the problem.

I'm surprised you chose that name considering you have no patience. .

I only play speed chess :-).

Hard to say if you're complaining or rejoicing. .

Just stating the fact

The fact being you're going to get screwed once implemented

If the percentage is only 3 % why worry unless the story is different.

Anyone who is in the market can say that the data is manipulated by national and the supported by it followers.

Wait and Watch but the question is will Labour impliment it in true spirit and on time as have doubts over their intention now when in power.

This one flagship promise is a Real test of the government.

You're the one on pins, so follow your advice

Foreign buy ban is a core election promise of the Lab/Grn/NZF government. Deliver on it or they are gone. A simple as a binary event.

Absolutely, hence I think they need to get it right first time

19
up

FHB have already missed the bus so it is not a bad idea to wait and see how things go and if they find something good and within their budget can buy for long term.

Market may or may not go down (Most probably will go down by what percentage is a question mark) but one thing is definite at this stage that it is NOT going up for sometime so why rush.

Hi David
What is your rationale for considering the dollar amount borrowed, rather than the number of borrowers?

As consideration of the amount borrowed includes house price inflation(deflation?), this inclusive factor blurs the actual activity by each of the different groups.

From my reading of the RBNZ data the actual number of borrowers June YOY are:
1st home: June 2015: 1840 - 2016: 1970 - 2017: 1868 - 2018: 2039
Investors: June 2015: 5475 - 2016: 6458 - 2017: 3656 - 2018: 3545
If I have read these figures correctly, they clearly show that the numbers of
- FHB has tended to increased from 1840 in in June 2015 to 2039 in June 2018.
- investors have shown considerable decrease for 5475 in June 2015 to 3545 to June 2018.
I suggest the numbers - rather than the value of mortgages - which excludes movement in house prices is a better reflection of the activity of these groups.

Either way; excellent articles monitoring the changes in the activity of different sectors within the market.
Thanks

The market is the market.
People that sit on the sidelines thinking everything is overpriced will miss out again.
Interesting that Mr Twyford is now wanting to increase the amount of the cap for KiwiBuild due to the dynamic nature of the housing market, so Phil thinks that houses are going up rather than down!!!!

You are correct. Market is market and in market nothing is one way.

Yeah but if looking for very long term can buy but as of today one should not rush though should be ready to buy to stay and not for fast money as that phase is over for some years.

Another month, another billion dollars of owner occupier interest only lending, and $600million for investors.... and 10% of new P&I lending at >80% LVR

another billion dollars of owner occupier interest only lending..

where do u see the interest-only stat? And I remember, in an old article in here, it was suggested that so called interest-only numbers includes 'revolving-credit' loans, which is NOT that bad. (I'm not sure how revolving-credit works on a mortgage- but remember reading some comment like that )

I looked at another of the rbnz stat series, c32 I think. And yes, it does include revolving credit, because at least some revolving credit accounts don't have a decreasing limit, so they are an interest only loan in effect if you choose to use them that way.

The only number that matters . Outstanding mortgage debt now totals in excess of one quarter of one trillion. Opportunity for a disruptive financial service to enter .

Its simple. Little to no upside risk and massive downside risk. Good to see FHB's applying logic.

With a mortgage it's leveraged downside risk too.

The directors of the Bank of Mum & Dad that was underpinning many FHB purchases are looking at the cooler economic winds gradually building, observing rising affordability so are telling their kids, lets just sit back for while.

There are also no good quality First Home Buys on the market. I've been trawling trademe for 2 months and the only properties going on sale are mostly over $1.1mil, potentially leaky plaster homes, ugly (can't remodel the whole exterior!), in undesirable areas or just plain crap. There are very few good homes out there.

Not a surprise. With Ban imminent, kiwibuild getting lots of press (but little actual traction), immigration in decline, prices in decline (regardless of spin) and a real possibility of rates going up (but who really knows), you would have to be pretty bullish to step up as a FHB right now. Agree with the above that most of the stuff for sale is poor quality regardless of location. To boot apartments are really struggling in Sydney and Melbourne mainly as Chinese bail on deposits. Should the same thing happen here there could be some good pickings in the next 12-24 months as the Auckland market current apartment wave comes on line and settles...or is abandoned.

Up to 1 Mill AUS households described as being in mortgage stress. Hard to believe similar % not in the same situation back here.

Little doubt that interest hikes are coming.....and they won't need to move much to keep the downward momentum on house prices accelerating..

Hi Averageman, how do you view the online valuation sites (trademe, homes, ANZ, etc) and their accuracy? I ask as I purchased my FH in late 2016 (West Habour area, $750k) and have these valuation sites showing about a 10% increase in property value over the past 18 months. Is this just inaccurate valuations affected by new CV's and higher quartile sales? Or a specific characteristic of the suburb?

With so much chat on this site about value declines I have been bracing for the drop (emotionally haha)..

For context, I won't be selling for a long time, so more just curious than actually looking to fine market value..

Thanks!

Andrew

Sure do. Congrats. Based on their estimates most asking prices are miles from reality when checked against recent sale also listed, so its hard to guage any accuracy. One does note many sales seem not to show almost as if the seller and or agent has opted to not show it. If you plan to live there for a while id ignore most of the bulls vs bears chat as it mostly applies to investor, yield etc.

I'm backing off all the way out the country. What compelling reason is there for a kiwi trying to improve their life to remain in NZ?

Which has better economic opportunities, Perth or Palmerston North? They're the same price.
Which has better economic opportunities, Brisbane or Hamilton? They're the same price.
Which has better economic opportunities, Melbourne or Auckland? THEY'RE THE SAME PRICE!!!

NZ is good for specuvestors milking low-income people of their WINZ and Working For Families money. NZ is good for wealthy people from the third world who have a long term plan of making to Australia. But for everryone else - why bother?

I moved back to NZ from Aus 4 years ago. Only because of the overwhelming desire to help my sick and dying mother.
I don't regret doing that. But I do wish I could have stayed in Aus. Overall much better quality of life. I can't go back because it would be too unsettling for my children.

Which country looks after New Zealanders better?
Clue, it isn’t Australia.
New Zealanders are classed as Second class citizens in Australia.
If you think you are going to be better off then book your flights!
There are so many New Zealanders come back from Oz as it didn’t work out as they thought it would.

Only a problem if you need welfare.. if you stay employed, out of the police cells, and pay your health insurance then what does it matter?

There are over 600,000 Kiwis in Australia TM2 and I am one of those. We are not coming back. Second class citizens my ass, I will never need the dole and I don’t intend on committing a crime.

Aussies don’t hand their citizenship out in packets of cornflakes like NZ does and I am more than happy its that way.

Tui I lived in Oz for a year 10 years ago and I also liked it.
I didn’t need to work over there as I had investments in NZ that supported us fine.
Came back because someone was a bit homesick and it wasn’t me.
We have no regrets as in our line of business it has been a helluva lot easier to get ahead financially and has set our family up indefinitely.
There are many Kiwis living in Oz who returnto NZ prior to retiring to get the NZ Pension which isn’t exactly right but happens because oZ won’t pay it!