New data shows steep declines in new mortgage lending

New lending fully secured by residential mortgages fell by $798 million in April from March and was down 23% on April last year and was down 45% on April 2021.

The data, included in two new data series published by the Reserve Bank for the first time on Friday, showed total new lending secured by mortgages was $4.89 billion in April, down from $5.69 billion in March and from $6.35 billion in April last year. The total in April 2021 was $8.88 billion.

“This data will add to the wide range of information that is available to support the analysis of the New Zealand financial system and understanding the impact of monetary policy on new lending occurring every month,” RBNZ said when it announced the new tables.

The central bank raised its official cash rate (OCR) to 5.5% on May 24 from 5.25%  on April 5. It has raised the OCR from 0.25% in October 2021.

Of the new mortgage lending in April, 79.5% was at fixed rates with one-year terms the most favoured – owner-occupiers and property investors fixed $1.46 billion for one year.

About 75.8% of the new lending, or $3.71 billion, was to owner-occupiers with another 22.3%, or $1.09 billion, lent to property investors in the latest month while another $96 million was lent to businesses but secured by mortgage.

The biggest decline in lending was to property investors which was down 27.5% from April 2022 and down almost 54% compared with April 2021.

By comparison, lending to owner-occupiers was down 21.6% from April last year and down 41.6% from April 2021.

The government started to phase out mortgage interest deductibility against tax for landlords over a four-year period starting Oct 1, 2021, making property investment less attractive.

Another factor dampening investment in housing has been falling house prices – the Real Estate Institute of New Zealand's house price index was down 12% in April from April last year.

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