Interest-only lending contained: CoreLogic

In its latest weekly update, real estate researcher CoreLogic notes interest-only lending is way down from historical peaks of roughly 40%. Interest-only lending investors and owner-occupiers has fallen steadily since January 2016, according to RBNZ data.

CoreLogic senior research analyst Kelvin Davidson (pictured), says the low figure indicates banks have "contained" interest-only facilities, despite recent moves from Australian regulators to loosen IO restrictions.

In December, the Australian Prudential Regulation Authority relaxed interest-only restrictions, which had limited the facilities to 30% of overall mortgage lending. The move was designed to breathe some life into the Aussie market, which has plummeted in major centres like Sydney and Melbourne. 

Advisers believe Australian restrictions have influenced New Zealand's major banks in recent years, with the big four Australian-owned. They hope loosened rules will lead to a more receptive attitude from New Zealand banks.

Yet Davidson sees no sign of New Zealand's lenders loosening up on interest-only. He believes the interest-only tightening will stabilise the market. He adds: "It was reassuring to see that ‘risky’ interest-only lending is contained. The share of lending done on interest-only terms is holding below 30%, well down on previous peaks of more than 40%. It’s the investor share of interest-only lending that has really driven the drop in the overall figure over that period, although there’s also been less interest-only lending to owner-occupiers”.

Davidson told TMM he'd be "surprised" if there was a resurgence in interest-only lending. "The general conditions are that banks are pretty cautious about risky lending. They have been given more leeway on LVR but haven't taken that up yet. There's a really cautious attitude," he added.