Please Sir, Can I borrow more

The latest monthly credit statistics from the Reserve Bank show that borrowing is at its highest level since the GFC in 2008 and 2009. The data shows lending was up 5.4% year-on-year in May.

ASB chief economist Nick Tuffley says housing credit will be the part catching the RBNZ’s eyes the most.  It is clear that, even before the RBNZ cut the OCR in June, past falls in interest rates were already fuelling mortgage borrowing demand.

"We still expect a 25 basis point OCR cut in July, with some risk of further cuts.  But the borrower response to falling interest rates, along with the weaker NZD, may temper the RBNZ’s preparedness to cut too much."

"Mortgage lending had a whopping month in excess of $1.5 billion of net lending growth.  That is the strongest dollar value growth since November 2007.  The temperature remains high in the Auckland housing market, with signs of lifting activity elsewhere.  Declines in mortgage rates are likely to be playing a part in stimulating the added lending growth," Tuffley says.