Mortgage borrowers drop short term fixes and flock to one-year rates

The latest RBNZ data show in July 40.9% of new owner-occupier loans were on a one-year fixed term, up from 39% the previous month.

Investors are also keen on the one-year fixed term, with the share of lending to them at 42.4%. However, this is down 2% from 44.4% in June, figures in the central bank’s new lending fully secured by residential mortgage reveal.

In comparison, owner-occupiers share on floating rates was almost half of the one-year rate at 20.7% dropping from 24.7% in June and 31.6% in May, while the share of mortgages taken out for six months dropped to 6.7% from 8.2% in June.

Floating terms for investors accounted for 22.5% of new lending, down 4% from 26.5% in June. Their share of 18-month fixed terms rose to a 10.1% up 0.6% points from 9.5 percent the previous month.

Overall, new residential lending increased to $9 billion in July, up from $8.7 billion in June. Compared to July last year, the total monthly new lending was up 35.9% from $6.6bn.

The share of total new residential lending on fixed interest rate terms increased to 78.5%, up 4% from June.

New owner occupier lending increased to $6.3 billion, up from $6.1 billion in June. Loans to this group on floating and short-term fixed rates represented 68.3% of new lending.

Terms on 18-months fixed accounted for a combined share of 31.7%.

New residential investor mortgage lending rose from $2.4 billion in June to $2.6 billion a month later.

The RBNZ in its Monetary Policy Statement last month suggested it may drop of the OCR to 2.5% by the end of the year.