Key Facts

  • Gross new lending flows between August and October were 4 percent higher than a year ago, as per Reserve Bank data.
  • The total value of lending was $16.8 billion which is below the levels seen in 2020 and 2021.
  • Highly likely that borrowers will continue to face a ‘higher for longer’ environment in regard to mortgage rates.
  • Mortgage rates of next year expected to be similar to current levels due to the Reserve Bank’s tough stance on inflation.
  • Mortgage arrears remained low in October even as interest rates climbed, reports Centrix.
  • Loan-to-value ratio rules have ensured borrowers are not falling behind due to increased interest rates.
  • Only 0.3% of investors and about 7% of owner-occupiers borrowed with less than 20-35% deposit in October according to CoreLogic.
  • Mortgagee sales remained low as borrowers continue to meet higher financing costs.
  • 41 mortgagee sales were reported by CoreLogic for the third quarter.

Article Summary

New Zealand’s household lending activity is once more on the rise, according to Reserve Bank data. However, borrowers are likely to continue facing high mortgage rates for a considerable period. This follows a 4 percent increase in gross new lending from August to October compared to last year, after a period of quiet for 12 to 18 months.

Leading property research firm CoreLogic revealed that the overall value of lending, calculated at $16.8 billion, remains below the levels seen in 2020 and 2021. Kelvin Davidson, CoreLogic’s Chief Property Economist, noted the necessary preparedness for higher interest rates among new borrowers. He anticipates a ‘higher for longer’ scenario, implying even if wholesale rates decline, the decrease may not be significant.

Davidson reasoned that the Reserve Bank’s assertive approach on inflation makes it likely that mortgage rates next year will mirror current levels. Nevertheless, the absence of low-deposit home loans ensures borrowers are kept afloat despite heightened rates. Loan-to-value ratio measures remain stringent, as evidenced by only 0.3 percent of investors and approximately 7 percent of owner-occupiers receiving a loan with less than a 20-35 percent deposit in October.

The mortgage market has achieved a level of insulation, thanks to the loan-to-value ratio rules that have been effective for the past decade in New Zealand. Despite escalating interest rates, mortgagee sales continue to stay low as borrowers manage to meet increased financing costs. The most recent data from CoreLogic documented 41 mortgagee sales in Q3.

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