Growth in mortgage lending slows

Growth in mortgage lending by registered banks is shrinking dramatically and looks like it will go even lower than in the depths of the global financial crisis (GFC).

Sunday, October 10th 2010, 9:59PM

by Jenny Ruth

Based on their June quarter general disclosure statements (GDSs), mortgage lending by registered banks increased just $1.06 billion in the three months compared with $1.32 billion in the March quarter and $2.02 billion in the June quarter last year.

Reserve Bank of New Zealand figures, which are indicative only since its figures vary considerably from those reported in the GDSs, suggest a further step down in growth in the September quarter this year with bank lending increasing only $0.47 billion in July and August.

During the GFC, quarterly growth sank to just $0.97 billion in the December quarter of 2008 (the $0.05 billion increase in the September 2008 quarter was distorted by Bank of New Zealand being the last of the four major banks to transition from reporting under the Basel 1 rules to the Basel ll rules. The major difference between the two is under Basel l banks included business loans backed by residential mortgages in their totals).

From that point, growth picked up each quarter through to the September quarter of 2009 when mortgage lending grew $2.3 billion.

While all the banks were reporting under the Basel l rules until the March quarter of 2008, current growth figures are considerably lower than before the last housing boom began, even given the distortions caused by the changing rules.

For instance, bank lending on residential mortgages increased by $2.41 billion in the March quarter of 2003. Total bank lending on residential mortgages in that quarter was $74.48 billion compared with the $158.22 billion total at June 30 this year.

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