Mortgage Market Insights

Key Facts

  • Total lending rose to $5.9bn in April, marking the eighth increase over the past nine months.
  • Interest-only lending constitutes 15% for owner-occupiers and 30-35% for investors.
  • Average loan sizes for investors and first home buyers (FHBs) are approximately $545,000 and $555,000 respectively.
  • About 9% of FHBs accessed the market with less than a 20% deposit in April.
  • Likely loosening of LVR rules is expected to benefit FHBs and investors.
  • Future debt-to-income limits could impact loan approvals and property investments.
  • 60% of existing mortgages are due for repricing within the next 12 months, potentially facing rate increases.
  • Job losses pose a risk to the mortgage market due to rising repayment stress and non-performing loans.
  • Housing stock is valued at $1.63 trillion with an overall LVR of approximately 22%.

Article Summary

The current mortgage market in New Zealand, as detailed by economist Kelvin Davidson, reflects a slow yet steady recovery. Total lending in April reached $5.9 billion, demonstrating a continued upward trend, though from low starting points. Interest-only lending remains under control, with recent data showing lower percentages compared to earlier years.

First home buyers (FHBs) face challenges with the recent removal of first home grants and indications of mortgage rates staying high. However, many are still entering the market with less than 20% deposits, aided by the expectation of looser Loan-to-Value Ratio (LVR) rules. These upcoming changes will likely provide greater market access to FHBs who can meet serviceability requirements.

Investors will also benefit from eased LVR restrictions, allowing a portion of new lending with lower deposit requirements. Despite challenges like low rental yields and high mortgage rates, the new rules could relieve some financial constraints.

Additional market dynamics include potential future debt-to-income limits, which may affect loan approval rates and investment growth. Existing mortgage repricing remains an ongoing process, with many loans facing higher rates soon. The labour market’s softening and upcoming job losses add to the concerns of repayment stress and potential mortgagee sales. Despite these challenges, the overall housing market retains a solid equity buffer, with a low cumulative LVR of around 22%.

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