Lending growth on a steady path upwards

Mortgage borrowers rolling off a fixed term interest rate in the next few weeks are expected to join the rush to a six month floating rate even though the next OCR drop isn’t expected until the middle of February.

Monday, December 2nd 2024, 9:35AM

That means borrowers could be sitting on a rate that is typically somewhere between 1.5% to 2% above fixed rates for nearly three months.

Although the Reserve Bank says it will probably cut the OCR by another 0.5% in February and make slower 0.25% cuts after that until it reaches a 3% neutral rate in mid-2026, some mortgage advisers are saying much can happen before then and borrowers should be cautious and perhaps switch to a one year fixed rate to take advantage of lower rates in a year’s time

While mortgage rates fall, there is a solid growth in overall lending with new mortgages up 15.1% to $7.5 billion in October from $6.5 billion in September. That is a big 30.4% increase on the $5.7 billion lent in October last year.

Noticeable in the figures is the rebound of investors. Their share of new mortgages rose to 22.7%, up from 21.1% in September and substantially above their 17.7% share in October last year.

On the other hand, the share of new mortgages to first home buyers has dropped to 20.7%, down from 21.1% in September and 23.7% in October last year.

It was a similar story for movers, with their share of new mortgages dropping to 55.1%, down from 56.6% in September and down from 57% in the same month last year.

Annual growth in the total value of new mortgages for investors increased 67.5% while for first home buyers it rose 14.2% and other owner-occupiers (movers) 26.1%.

During October investors took out $1,709 billion in new mortgages compared to $1,021 billion a year before. First home buyers were lent $1,563 in October compared to $1,369 billion in the same month the previous year, while movers took out $4,152 billion in new borrowings compared to $3,293 billion in October last year.

A total of 19,273 new mortgages were taken out, up 11.4 % on September’s 17,298 and in comparison, to October last year the number was up 22.4% from 15,740.

The average new loan value across all borrower types increased to $390,910. For first home buyers the average value of new loans they took out rose by 1.2% from September, while the average value for investors increased by 5.1%.

Borrowers changing loan provider increased 44.7% compared to October last year. That was also a monthly increase of 19.3% from September.

The number of new commitments for top=-ups and property purchases increased by 8.5% and 12.8%, respectively, when compared to September.

Tags: RBNZ