Borrowers shying away from too much debt

The monthly share of new mortgage commitments with a DTI of above five has now dropped for 13 months in a row.

Relative to their incomes, borrowers with a DTI of above five (borrowings of five times their income) drifted from 38.8% in December down to 34.4% at the end of March - the lowest since 2017 when the RBNZ started collecting this data.

It was also a big drop from the high of 60.2% in November 2021, when house prices hit their peak during the pandemic-induced madness of record low interest rates.

Since then, the monthly share of DTI above 5 lending has dropped sharply. House prices have declined by about 17-18% across the board, but mortgage interest rates have spiralled higher.

Banks reining in their lending policies in the wake of the CCCFA changes and the fact home buyers don’t need to borrow as much money has brought DTI levels down.

It is shown in the RBNZ’s lending figures between December and March.  The number of first home buyers with DTI of above five was down 28.4% in March, from 35.3% in December. Lending with DTI of above five to other owner occupiers, without investment property collateral, dropped to 24.5%, down from 28.4% in December.

The monthly share of lending to investors with DTI of above five  sat at 49.6% in March, down from 54.5% in December, while the share for owner occupiers with investment property was at 50.8%, down from 54.5% in December.

The RBNZ says there is no immediate plan to implement DTI restrictions as the housing market is in a downward spiral. However, the country’s banks have been given 12 months to get ready for any DTI implementation.

Many economists are not convinced DTIs won’t be introduced and say loosening up the LVR restrictions is a sign the RBNZ will implement its DTI tool in March/April next year.

No definitive answers have been given by the RBNZ on what DTI level it will make and what sort of exemptions might be included.

In the latest DTI figures, gross income for first home buyers averaged $149,700 in March, up from $146,000 in December, while the average gross income for other owner occupiers without investment property collateral increased to $199,400, up from $193,400 in December.

The quarterly share of lending to FHBs with DTI of above five and LVR above 80% declined to 9.3% in the first quarter of this year, down from 11.2% in in the fourth quarter of last year.

Owner occupiers without investment property share of lending with a DTI above 5 and LVR above 80% showed no change, remaining at 1.9% in the first quarter.

Quarterly share of lending to investors with DTI above nine increased to 8.7% in the first quarter, up from 7.2% in the fourth quarter of last year.

Similarly, DTI above nine lending to owner occupiers with investment property collateral rose to 7.6% in the first quarter, up from 6.6% in the fourth quarter last year.

The quarterly share of Auckland investor loans with DTI above seven dropped to 17.2% in the first quarter, down from 18.5% in the fourth quarter last year, while the share of non-Auckland investor loans with DTI above 7 declined to 12.3% in the first quarter, down from 12.6% in the December quarter.