Rise in investor lending reflects strong market

More evidence of the surging strength of the housing market comes in new data showing mortgage lending, including to investors, is up across the board.

Thursday, April 28th 2016, 12:57AM

by Miriam Bell

The Reserve Bank’s latest residential mortgage lending statistics are out and they provide yet more evidence that the country’s housing market is running hot.

In a reflection of recent housing market data, which has showed increasing prices and sales volumes, the Reserve Bank data shows significantly increased lending.

In fact, total new bank lending in March hit a record high of $6,572 billion. This was up on the previous high of $6,500 billion set in September 2015.

After the Reserve Bank’s latest loan-to-value (LVR) ratios came into force on November 1 last year, total lending initially lifted before dropping significantly in January.

However, in February total lending jumped back up again to $5,169 billion, indicating that borrower behaviour was picking up along with the market.

While it could be argued that the effect of the LVRs has worn off and investors are re-entering the market en masse, lending was up noticeably among all borrower groups.

Of the new lending in March, investors accounted for $2,322 billion. This was up on the February figure of $1,777 billion.

But the biggest group of borrowers was other owner-occupiers, who accounted for $3,408 billion of new lending in March. This was up on $2,720 billion in February.

Borrowing among first home buyers also jumped, to $753 million, in March. This was as compared to $591 million of new lending in February.

March’s new lending included a total of $517 million higher than 80% LVR lending. This was up from $438 million in February.

Investors’ share of higher than 80% LVR lending rose to $42 million in March, which was up from $34 million in February.

Once again, the investors’ figure was significantly less than the amount of higher than 80% LVR lending that went to first home buyers ($249 million) and other owner-occupiers ($221 million).

The Reserve Bank data divides total lending to investors into two categories: higher than 70% LVR lending and less than 70% LVR lending.

Higher than 70% LVR lending to investors came to $773 million in March, which was up on the $622 million loaned in February.

As has proven to be the case in the past, most of March’s lending to investors was less than 70% LVR lending. It came in at $1.549 billion.

Meanwhile, the Reserve Bank data also shows that banks have continued to stay within their 10% threshold for lending to borrowers with less than 20% equity.

In March, 7.9% of new loans fitted into that category. This was down on 8.5% in February.

Tags: banks Lending RBNZ