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The housing market’s recovery since the lockdown has continued strongly, with mortgage loans last month hitting a record high in August.
The last reserve bank Residential Home Loan Figures by Borrower Type show that nearly $ 6.8 billion in mortgages were advanced last month
This follows a July record of nearly $ 6.6 billion the previous month. The RBNZ has been compiling this monthly data series since 2013 and has published it publicly since August 2014.
The all-time high in this data series for ANY month was the nearly $ 7.3 billion advanced in May 2016, which was shortly before the Reserve Bank of New Zealand placed strict caps on lending to investors. The RBNZ in May 2020 removed all loan-to-value (LVR) limits, including those on investors, for at least 12 months.
The $ 6.8 billion borrowed in August 2020 was up 26% from the same month a year ago (nearly $ 5.4 billion). Last month it easily beat the previous August record, which was $ 6.1 billion in August 2016.
In August 2020, first-time home buyers were once again strong in the market, exactly matching their record level of borrowing of $ 1.344 billion borrowed in July 2020. July’s FHB total was also a record in terms of their proportion of the total, at 20.4%. Of course, because the total amount loaned in August was higher, the share of FHB dropped a bit, down to 19.8%.
Investors borrowed almost exactly the same amount in August as they did in July as well, at $ 1.452 billion.
The number of high loan-to-value loans by investors (considered by investors as loans of more than 70% of the value of the property) increased again, although not as much as the previous month, when it more than doubled . Investors’ high-LVR loans totaled $ 491 million in August, 10.3% more than high-LVR loans in July.
Among FHBs, their high LVR loan amount (which for them equates to more than 80% of the property’s value) was $ 554 million, which was slightly less than the $ 577 million high LVR loan they made the last month.
The market has been stimulated by lower and lower interest rates. On the one hand, this means cheaper and more affordable mortgages, while, on the other, the very low rates now available for deposits make alternative investments, such as property, appear more attractive.
Now, the Reserve Bank has indicated that probably go ahead before the end of the year with a Loan Financing Program (FLP), which implies the direct granting of loans to banks at cheap interest rates around the level of the Official Cash Rate (currently 0.25%). This will put further downward pressure on retail interest rates for both mortgages and deposits. And this could well be supportive for the housing market in the run-up to Christmas..
Here are some of the highlights of the mortgage figures for the month as detailed by the RBNZ:
- Total new monthly mortgage commitments was $ 6.8 billion in August, the highest August on record since the survey began in 2013. This is an increase of $ 0.2 billion (3.0%) from July 2020 and up to 26.0 % since August 2019.
- New mortgage commitments for first-time home buyers were $ 1.3 billion in August and were consistent with July, while other owner-occupiers increased from $ 3.7 billion in July to $ 3.9 billion in August.
- First-time home buyers accounted for 19.8% of new mortgage commitments, up from 20.4% in July, while the share of other homeowners in new commitments increased from 56.7% in July to 57.9 % in August.
- Year-on-year growth nationwide in the value of new mortgage commitments for first-time home buyers was 45.6%, while new commitments to investors rose 41.9%.
- The 26.0% year-on-year increase in new mortgage commitments was largely driven by the Auckland region. New mortgage commitments in Auckland increased from 3.9% in July to 24.5% in August, while new commitments outside Auckland increased from 17.6% to 27.1%.
- New monthly mortgage commitments with a high loan-to-value ratio increased since restrictions were removed in May 2020. New mortgage commitments with high LVRs to investors registered an increase of 10.3% in August.
