Understanding the Current Trends: New Zealand’s Housing Loan Market Shows Signs of Turnaround Amid Higher Mortgage Rate Concerns

Date Published: 16 January 2024

Key Facts

• The housing loan market shows signs of recovery after a subdued period over the past 12-18 months.
• Gross new lending flows over August-October were 4% higher than the same period last year, but still, remain lower than 2020 and 2021 figures.
• Rules on loan to value ratio continue to have significant effects. About 0.3% of investors got a loan in October with less than a 35% deposit.
• First home buyers (FHBs) are capitalizing on the speeding limit, with one-third of FHBs who got a loan in October doing so at low deposit.
• ‘Risky’ lending remains in check with only 17% of October lending being interest-only.
• Total mortgage debt currently stands at $354bn, versus an estimated value of property stock of $1,585bn.
• About 54% of current loans are fixed but due to be repriced within the next 12 months.
• Non-performing mortgages remain very low, at less than 0.5% of the value of debt.
• Many existing mortgage holders are ahead of their repayments, with about two-thirds of borrowers at least three months ahead.
• Despite a robust labour market, the repricing issue of mortgages is a significant point of concern, especially with potential job losses in 2024.

Article Summary

The housing loan market in New Zealand has begun to recover following a lull period that lasted more than a year. CoreLogic reports that while gross lending flows have increased by 4% compared to the year prior, they still fall short of figures reported in 2020 and 2021. Those loaning properties are impacted by rigid loan to value ratio rules. Investors, specifically, rarely manage to attain a loan with less than a 35% deposit.

Interestingly, first-time homebuyers have been leveraging the speed limit, with nearly a third of them securing a loan at a low deposit in October. ‘Riskier’ types of lending, such as interest-only loans, remain relatively restrained, comprising only around one-fifth of lending in October. Current total mortgage debt stands at $354 billion when contrasted with our estimated property stock value of $1,585 billion.

Nearly over half of current loans are set to be repriced within the coming 12 months. Nonetheless, non-performing mortgages persist minimally, at a diminutive 0.5% of debt. On a more optimistic note, numerous existing mortgage holders maintain a surplus on their payments, with two-thirds of borrowers being a minimum of three months ahead.

Whilst the labour market has demonstrated resilience in the past few years, concerns loom regarding the mortgage repricing issue amidst potential job losses in 2024. Rising mortgage rates alongside low rental yields present obstacles for investors intending to broaden or initiate their portfolios.

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