Big increase in home loans made by banks

Despite a recession, the number and value of home loans were up by 21% in the second half of last year, compared to the first half.

Analysis of retail banking data by the New Zealand Banking Association shows there were 56,938 new home loans made between July to December and the overall value of those loans increased rose by 24.7% to $23 billion.

Of the 56,938 new home loans, 26.7% were issued to first time home buyers at an average of a home $493,000, up 4.4% from the previous six months.

In total 1.4 million home loans across 1.1 million customers were done at the country’s retail banks at an average value of  $323,082, an increase of 1.6%.

Banking Association chief executive Roger Beaumont says the increase in home lending is quite significant.

“A factor that may have influenced this is the movement in the official cash rate (OCR), which declined from 5.5% to 4.25% in the second half of last year. It also reflects a growing return of confidence to the property sector.”

The OCR is expected to drop another 25 basis points next month and possibly even 50 basis points because of US president Donald Trump’s global tariff war.

Most economists are now predicting an OCR below the RBNZ’s expected terminal cash rate of  3%.

Repayments

About 1.5% of households were behind on their mortgage repayments a 9.5% increase from the first half of the year.

Of all banking customers, 8,863 applied for hardship status, a drop of 4.4% compared to the previous six months.

Nearly 7,500 customers were granted hardship status, an increase of 23.8%.

On the other side of the coin 39.4% were ahead on mortgage repayments, but that is down from 39.7% in the previous six months.

“It’s great to see a large proportion of people with home loans ahead on their repayments and reaping the benefits of paying down their loan faster, especially in the current economic climate,” Beaumont says.

Of the 1.4 million home loans, 17,445 switched from principal and interest repayments to interest only repayments, up from 13,095 on the previous six months.

Transactions

Other data shows 2.17 million customers had a credit card and 66.5% were paid off in full without incurring any interest cost. The average monthly spend was $2,131.

Bank customers made more than 2.1 billion transactions in the six month period, 3.6% of which were made in branches. ATM transactions made up 1.8% of all transactions.

Complaints

Banks received 4.9% more complaints than in the previous six months.

That was one complaint for every 42,300 transactions – similar to the first half of the year

About 3.2% of all customer complaints required resolution through the Banking Ombudsman, a drop of 0.3%.

Banks were resolving complaints in about 5.9 days, faster than the 6.5 days taken in the previous six months.