Quiet on the investor lending front

Tuesday 31 January 2017

Investor lending activity is clearly more subdued reveals the latest mortgage lending data, which adds emphasis to the picture of a much slower housing market.

The latest residential mortgage lending data from the Reserve Bank shows that total new lending dropped a little to $5.855 billion in December.

This follows a surprise jump upwards in November when total new lending hit $6.349 billion, although it looks like that could have been a blip in the trend.

In December, there was a slight decrease in lending to all borrower groups in line with the lesser total.

But the share of lending going to first home buyers and other owner occupiers was up – while the share of lending to investors was well down on the heights it reached last year.

Investors accounted for $1.575 billion of new lending in December. This is as compared to $1.737 in November or the record level of $2.698 billion in May 2016.

December’s investor share equated to 26.9% of the overall lending total and is the lowest share since the Reserve Bank started releasing this data back in August 2014.

Before the introduction of the Reserve Bank’s latest investor-focused LVR’s last July investors were responsible for around 38% of total new lending.

New lending to investors started to drop immediately after the Reserve Bank’s LVR announcement and has been trending downwards ever since, apart from the rise in November.

Conversely, the share of lending going to first home buyers, who accounted for $809 million of new lending in December, has been going up.

First home buyer lending equated to a 13.8% share of December’s new lending and marks a solid increase from the 11.7% of total lending that went to first home buyers in December 2015.

Other owner occupiers were responsible for $3.421 billion of new lending in December. This was down on November, but higher than the three months previous to November.

The amount of higher than 80% LVR lending to investors dropped slightly, to $9 million, in December from $10 million in November.

Higher than 80% LVR lending to investors is now significantly lower than it has been in the past. In June 2016, it was at $50 million.

But higher than 80% LVR lending to both first home buyers and owner-occupiers was also down.

Perhaps surprisingly, higher than 70% LVR lending to investors was up slightly in December. It came in at $213 million, as compared to $209 million in November and $178 million in October.

Meanwhile, the trend of more subdued investor lending was also apparent in the Reserve Bank’s data on the Auckland vs non-Auckland market.

New lending in Auckland was down for both investors and non-investors in December.

Auckland investors accounted for $1.140 billion, as compared to $1.265 billion in November, while Auckland non-investors accounted for $1.823 billion, as compared to $2.007 billion in November.

Non-Auckland lending was also down in December. It dropped to $2.891 billion, as compared to $3.077 billion in November.

The Reserve Bank’s lending by payment type data, which looks at interest-only and principal-and-interest loans, revealed a similar picture.

Interest-only loans accounted for $2.062 billion of total new lending in December, while principal-and-interest loans accounted for $3.793 billion. Both figures were down on November.

Investors were responsible for $836 million of interest-only lending in December, as compared to $937 million in November.

Further, investors’ share of interest-only higher than 80% LVR lending continued on the downward trend it has been following since August 2016. It now equates to just 0.3% of the total.

The Reserve Bank’s lending data gives further weight to the argument that the housing market has slowed – as demonstrated by other relevant data across the board.

However, the question of whether the slowdown will last remains.

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