Investor lending falls to new lows

Residential property investors took out $894 million of new mortgages during the month, the smallest amount since records began.

The value of mortgages taken by investors were 63.3% less than December 2020, when the market was booming, and 2.1% less than December 2022.

High interest rates and tax have soured investors’ appetites for property, although the newly elected coalition government is reinstating mortgage deductibility and pulling the brightline test back to two years.

However, this has not been enough to entice investors back into the market in big numbers yet.

On the other hand, first home buyers have been rushing to buy property before investors dip back into the market and compete for houses.

They took out $1.3 billion or 25% of mortgages in December, the highest share to first home buyers since records began in August 2014. The share increased from 21.7% in December 2022.

The share of new mortgages to first home buyers has exceeded the share to investors each month since April 2022.

New mortgages for all borrowers during December came in at $5.3 billion, 3.6% more than in December 2022, but 33.1% less than in December 2021. December last year was the fifth month in a row in which the value of new mortgages surpassed the same month the previous year.

However, the average new loan fell to $353,300 this month, down 4.4% from $369,400 in November. Compared with December 2022, average values across all borrower types have fallen by 1.5% from $358,600.

The share of the value of new commitments for property purchases increased to 66.9% from 64.0% in November. The share for changes in loan providers declined to 17.9% from 20.9% in November. The share for top ups dropped slightly, falling from 11.3% in November to 11.1% in December.

Meanwhile the RBNZ’s intention to introduce debt-to-income (DTI) restrictions and relax loan-to-value (LVR) ratios later this year is expected to have more influence on the market.

Relaxing the LVR rules will mean most investors will need a 35% deposit instead of 40%, which could mean a return to the level of restrictions before the pandemic when a quarter of new investor loans went to those investors with a 30-35% deposit. But the RBNZ says DTIs are only expected to bind when interest rates fall.