Longer mortgage terms favoured as OCR drops

After going short for much of the year, investors, in particular, favoured longer-terms with 44% of their $2.4 billion in lending on one-year fixed terms.

That was up 10% on the previous month, when they had backed floating rates. However, overall lending to investors dropped from $2.5 billion to $2.4 billion, the data from the

RBNZ’s series new lending fully secured by residential mortgages shows.

Lending to owner-occupiers on one-year terms also rose in June by 5.6% from 33.4% to 39%. Of the $6.1 billion they borrowed on mortgages, $2.395 was on the longer term.

Their total lending dropped from $6.4 billion in May.

The RBNZ’s data shows when mortgages are uplifted and the significant move by investors and owner-occupiers to one-year terms came after the RBNZ cut the OCR from 3.5% to 3.25% in May. Another cut is expected this month and possibly another before the end of this year or early next year.

Some economists are predicting it might be forced lower than 2.5% if economic data keeps weakening.

Total new residential lending during June dropped to $8.7 billion from $9 billion in May. Compared to June last year though, lending was up 57.4% from $5.5 billion.

The share of total new lending on fixed interest rates rose to 74.5%, up 2.8% from May.

Floating terms accounted for 25.6% of new lending to investors, down 10.8% from 37.3% in May. For owner-occupiers it dropped from 31.6% in May to 24.7% in June.

During the month 95.6% of all new lending to investors was on floating or at fixed rates up to two years. And for owner-occupiers the share on two-year fixed terms dropped from 18.8% in May to 11.9% in June.

Within commercial property lending, investment property increased by $77 million, or 9.6%, to $883 million; commercial property development dropped by 21.6% to $156 million; and residential property development rose by 25.7% to $132m.