By David Hargreaves
The surge in household borrowing shows no sign of abating.
The RBNZ's monthly sector credit figures show that housing borrowing hit an annual growth rate of 8.5% in May, while total household claims (also including consumer finance) had an annual increase of 8.1%. In both cases these are the fastest rates of annual growth recorded since June 2008 at a time when the heat was just starting to leave the last housing boom.
Total household claims, at $234.963 billion, saw a seasonally adjusted monthly rise of 0.8%, which is the same as the increase recorded in April. However, to find a bigger increase than 0.8% you have to go back as far as November 2007.
In the past month the housing debt alone climbed by over $2 billion to $219.563 billion.
ASB chief economist Nick Tuffley said credit for housing "had an astounding month", growing nearly $2.1bn over May.
"The only other month on record with higher net $$ growth (and only other month to register over $2bn growth) is March 2007," he said.
"And March is typically a seasonally stronger part of the year for the housing market."
Tuffley said housing credit growth had accelerated rapidly in the past few months, a key driver of the spike in seasonally-adjusted monthly household lending, though he did note that housing’s annual growth rate of 8.5% is still half that seen at the peak of the pre-GFC boom.
The latest figures will offer no comfort to the RBNZ as it considers ways to rein in overheated housing market, with new macro-prudential measures - probably targeted against investors - likely to be announced soon.
The RBNZ's Key Household Financial Statistics series latest figures for the March quarter released earlier this month showed that household debt had now risen to a record high 163% of disposable income. The latest borrowing figures would certainly suggest that this record percentage figure is continuing to climb.
And a new monthly data series released for the first time by the RBNZ earlier this week showed that in May more than 41% of new mortgage borrowing was on an interest-only basis.
Additionally, about 55% of the money borrowed by investors was on interest-only terms.
Separate figures released at the same time by the RBNZ earlier this week showed that in May investors accounted for nearly 47% of borrowing in Auckland, up from around 46% a month earlier.
ASB's Tuffley said the acceleration in housing credit growth would be adding to the RBNZ’s "inflamed concerns" about financial stability.
"Nevertheless, we continue to expect the RBNZ to cut the OCR to 1.75%, particularly in the wake of the Brexit outcome and the stubbornness of the NZD.
"But the RBNZ will see the case for further housing restrictions as that much more pressing as its inflation and financial stability mandates increasingly clash."
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