Bank lending up, but profits down

Total lending growth for the fourth quarter was 1.47%, up from the previous quarter of 1.37%. Total lending sat at $321.2 billion at the end of the quarter, compared to $316.5 million three months earlier. 

Mortgage lending growth for the quarter was 1.26%, up from the previous period’s mortgage lending growth of 1.11% and consistent with 3Q2014, behind the growth displayed in corporate lending. Total mortgage lending stood at $190.5 billion at the end of 4Q2014 ($188.1 billion at 3Q2014), which makes up a major proportion of the major banks’ balance sheets. Other retail lending remained largely static at $13 billion.

The percentage of mortgages with an LVR in excess of 80% has continued to reduce and now represents 15% of total mortgage lending in 4Q2014, compared to 16% of total mortgage lending in 3Q2014. This supports the continued influence the LVR restrictions have had on New Zealand’s mortgage market with a net reduction in mortgages with an LVR in excess of 80% to total mortgages when comparing 4Q2014 to 3Q2014. Slowly but surely, the quantum of mortgages with a LVR in excess of 80% continues to reduce, improving the underlying position of the banks in respect of mortgage lending.

Mortgage holders on floating interest rates continue to make up 28% of the mortgage market at 4Q2014 (42% at 4Q2013, 63% at 1Q2012) and slightly down from 3Q2014. However, consistent with 3Q2014, the mix of mortgage funding continues to increase in the medium to long-term of fixed interest rates with approximately 43% of mortgage lending fixed for longer than one year (26% at 4Q2013, 15% 1Q2012). This is anticipated to increase further in the current low interest rate environment with banks offering low mortgage fixed interest rates on medium to long terms.