Mortgage figures show encouraging signs of growth

Mortgage lending has risen 28% since the disastrous February of last year when just $3.8 billion was lent – the lowest February figure since the Reserve Bank started data collection in 2014.

New mortgages in February this year totaled $4.9 billion, up a healthy 44% from $3.4 billion in January. The seasonally adjusted value increased by 4% from January.

The number of mortgages lent has also risen, as has the value of those mortgages, pointing to a market returning to some sort of normality.

However, Reserve Bank data shows investors are yet to come back into the market in any meaningful way. First home buyers are still active, although their numbers are falling as many wait for interest rates to fall.

The Reserve Bank says it doesn’t expect to start cutting the OCR until next year, but some of the major banks are predicting there will be cuts starting in November this year. Financial markets have already priced in interest rate cuts this year.

The share of new mortgages to first home buyers fell to 22.6% per cent in February, down from 24.1% in January, however, this is a year-on-year increase from 21.3 per cent in February last year.

Investors’ share of new mortgages dropped slightly to 17.3%, from 17.8% in January. This is, however, up 1% from February last year.

It is still well below the 2016 record 35% share of mortgages held by investors until the Reserve Bank brought in stringent loan-to-value ratios (LVR) for investors.

When the LVRs were temporarily removed in 2020, kick-starting a pandemic housing boom, investors again swung into buying and in October that year took out 24.2% of new mortgages.

When the LVRs were tightened again and the then Labour Government decided to phase out mortgage interest deductibility for investors, investors sat on the property market sidelines and their share of mortgages steadily dropped.

While the size of the average mortgage loan across the board has increased to $341,533, up 3.4% from $330,269 in January and up 2.1% from February last year, investors, who have traditionally been big borrowers, are taking out increasingly smaller mortgages. In February the loan size declined by 0.7% to $481,063.

In the latest data, the share of new mortgages to other owner-occupiers increased to 58.6% in February, up from 56.6% in January. In February last year, the share to other owner-occupiers was a whopping 60.7%.

The value of all new mortgages to first home buyers increased by 36% to $1,109 billion compared to $815 million in February last year.

The value of new mortgages to investors increased by 35.9% to $851 million compared to $626 million last year and over the same period rose by 23.7% to $2,880 billion to other owner-occupiers from $2,329 last year.

There were 14,391 new mortgages written, up 39.3% or 10,334 in January. In comparison to February last year, the number of new mortgages written has risen by 25.5% from 11,468.

The number of new mortgages for a change in loan provider increased by 17.4% compared to February last year and rose by 44.5% compared to January this year.

Top-ups and property purchases rose by 28.7 and 34.2% respectively over the same annual period.

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