Mortgage lending hits record high

Mortgage lending was up again in May and nearly half of it was in interest only loans, the Reserve Bank’s new, more detailed lending data reveals.

Monday, June 27th 2016, 4:42PM

by Miriam Bell

It seems that people simply can’t stay away from the housing market – despite strongly rising prices, affordability issues and talk that the end of the market is nigh.

The Reserve Bank’s residential mortgage lending statistics for May are out and they show that total new bank lending hit a new record high of $7.287 billion.

This is considerably up on the previous high of $6.572 billion in March.

Of May’s new lending, investors accounted for $2.698 billion. This was up on the $2.386 billion they borrowed in April.

New lending to owner-occupiers ($3.671 billion) and first home buyers ($833 million) was also up in May.

However, higher than 80% LVR lending to investors dropped from $46 million in April to $36 million in May.

In contrast, higher than 80% LVR lending to both owner occupiers and first home buyers increased in May.

Indicating the fruits of wider data collection requirements for banks, the Reserve Bank’s data also now offers a broader breakdown of lending patterns.

This month for the first time it has released statistics on lending by payment type – interest-only and principal-and-interest loans.

Almost 60% ($4.291 billion) of all new mortgage lending was on principal-and-interest payment terms, while 40% ($2.996 billion) was on interest-only payment terms.

The Reserve Bank said these proportions have been fairly stable since the data was first available in July 2015.

However, the amount of interest-only lending has been increasing each month this year. In April it came in at $2.621 billion of the total new lending.

The Reserve Bank also said the data showed that only 28% of banks’ existing stock of mortgages are on interest-only payment terms.

This is largely due to the fact that interest-only loans tend to convert to principal-and-interest loans after a period of time.

Traditionally, interest-only loans have been popular with investors and the Reserve Bank data shows that nearly 50% ($1.489 billion) of interest only loans went to investors in May.

The bulk of the rest ($1.468 billion) went to owner-occupiers, including first home buyers.

Last month, the Reserve Bank released data separating out the Auckland market from the rest of the country’s lending figures for the first time.

Auckland investors were responsible for $1.850 billion of the total new lending in May. This was up from April’s figure of $1.623 billion.

Auckland non-investors accounted for $2.096 billion of the total new lending in May. This was also up on their April figure of $1.913 billion.

Non-Auckland buyers borrowed $3.340 of the total new lending, up on the $2.986 billion in April.

While the lending totals increased across the board, the breakdown does indicate investors are responsible for a growing share of the Auckland market.

The collection and release of this new data is intended to provide the Reserve Bank with more detailed information about mortgage lending groups and trends.

Tags: banks Lending mortgages RBNZ Reserve Bank