In December after the main banks launched a limited 1.5% cashback offer for new mortgages, a record $5.7 billion (41.1.%) of the $14 billion taken out was for a change to a new lender.
However, the number of new mortgages for a change in loan provider increased by 12%
compared to February last year.
While the cashback offer was a big incentive and had advisers’ phones constantly ringing, many mortgage holders with loans on floating or short-term fixed rates got a wake-up call when the RBNZ slashed the OCR to 2.25% in November and at the same indicated it was the end of its cutting spree.
The financial markets did not react well and wholesale interest rates moved up in December and have continued to do so. The RBNZ has attempted to cool the market and kept the OCR at 2.25% with the proviso it will move if the oil shock from the Israel and US war with Iran cause inflationary impacts.
Mortgage holders who refixed in October got the best of the low rates.
The RBNZ’s monthly averages of banks’ advertised special rates offered to borrowers who meet certain conditions and are lower than standard rates, show the long popular two-year rate was at 4.5% in October and is now about 5.1%. In March last year the average market rate
For the three-year rate it is now about 5.3% after bottoming out at 4.8% in October.
During February the $6.6 billion of new mortgages taken out was up 10.1% from $6 billion in January and an increase of 13.5% compared to February last year. The seasonally adjusted total value, however dropped by 7.2% from January.
The share of new mortgages to first home buyers rose to 20.9% in February, up from 17.7% in January –an annual increase from 19% from February last year.
In comparison, the share to investors dropped to 18.8%, down from 21.6% the previous month and from 20.6 in February last year.
About 17,680 new mortgages were written, up 16.2% from 15,217 in January and compared to February last year’s 16,286, an increase of 8.6%.
The average new loan value across all mortgage types declined to $375,287, down 5.3% from $396,140 in January, but an increase of 4.5% from $359,048 in February last year.
New mortgages for property purchases rose to 59.6%, up from 51.7% in January and the share for top ups increased to 12.7%, up from 9.8% the previous month.
Housing on the back foot
While mortgage lending is settling back into a more normal picture, ANZ and Westpac economists are expecting house prices to fall this year.
The ANZ is predicting a 2% fall and Westpac a 1% drop.
In the latest ANZ NZ Property Focus report, the bank’s economists say the economy is now facing extreme uncertainty in the form of a global energy shock stemming from conflict in the Middle East.
“Challenges for the housing market come in the form of confidence about the economic outlook (read: job security) and upward pressure on mortgage rates.
“The increase in wholesale swap rates has been sharp and has already started to feed into higher mortgage rates even as the Reserve Bank has said it is happy to wait and see how things play out for now.”
Chief economist Sharon Zollner says much depends on how long the conflict in the Middle East restricts global oil supply, but given these new headwinds for the housing market, the bank now expects a 2% fall in house prices over 2026.
Search
