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."
18 Comments
Hold on now, wasn't Tuffley the one saying just a few days ago the Brexit would encourage interest rates to go up? But he now says they expect the RBNZ to lower the OCR? Implying they (ASB) want to raise at the same time the RBNZ drops? hmm, yeah I bet these (w)bankers would love that eh
Joe kiwi borrowing like hell to play alongside the foreign cash. Still no sign of a pop, so the prudent scratch their head and bicker with their partner about wether or not to join the casino. I expected it would have peaked by now, but it does seem infinity is indeed possible after all - we can actually prosper by selling the same asset over and over.
Infinity is impossible in the context of finite resources such as (earth based) land or petroleum or gold, but in 'the new normal' of interminable QE what is there to actually stop money inflating on a relatively permanent exponential curve. We could be buying milk with $1Trillion coins in a few years time.
To infinity and beyond!
Letting wealthy foreigners into Aotearoa is causing huge damage to locals who’ve loaned through the roof to secure a simple family home - National are to blame for their inaction, not protecting its people. The generational sociological repercussions / cost well be 10 times worse than they are now. All to preserve a few that have more than their fair share or need - so much for the brighter future :(
Over recent years I have become very very concerned about the future for my children, both in NZ and globally. Human greed and hunger for power will be our downfall and the majority of us can only sit back and watch it unfold like a block buster movie premier. I long for the old NZ where we were unique, had pride in our identity and revelled in the fact that we were a patch of paradise in the South Pacific. I guess we still are in a way but the for sale signs are up and the greedy vultures are circling. I am 40 years old and I feel like an 80 year old man reminiscing about the 'good ol days'!
Something wicked this way comes......
The carnival's leader is the mysterious "Mr. Dark" who seemingly wields the power to grant the citizenry's secret desires. In reality, Dark is a malevolent being who lures these individuals into binding themselves in servitude to him.
Remember back when the Nats told us he was the brightest ?
It appears he is The Dark Star
How can he possibly tell NZers he ever had a clue what
he was doing ?
He has behaved like a Donald Trump engratiating
himself around the world and with the Queen while
failing completely to address the most major
catastrophe NZ House Prices inflated beyond reach
without mortgaging your soul & your children's souls
to mostly Australian banks that take multi billions
In profits out of the NZ economy back to Australia
Oh & The Bank of China now too
Remember back when the Nats told us he was the brightest ?
It appears he is The Dark Star
How can he possibly tell NZers he ever had a clue what
he was doing ?
He has behaved like a Donald Trump engratiating
himself around the world and with the Queen while
failing completely to address the most major
catastrophe NZ House Prices inflated beyond reach
without mortgaging your soul & your children's souls
to mostly Australian banks that take multi billions
In profits out of the NZ economy back to Australia
Oh & The Bank of China now too
"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
Ho-ly-shit...
I don't know what is scarier, that investors are accounting for such a huge portion of borrowing or that a huge part of borrowing is interest only. Bank exposure must be getting pretty big.
When rates go up, people will be in a lot of strife. And if/when prices go down, it will be even worse.
blaming JK for the current raceaway housing inflation is not going to go any where. My garbage was not collected last week--may be blaMe JK rather than simply checking to see what the problem may have been-may be i put it out on a non scheduled pick up day.
JK knows the current housing is just a cyclical thing similar to past cycles. BTY when it does crash, as you say its going to happen because JK is not interested in doing anything about it, you can get in and buy at the time. Bit like--Some fools listened to bigger fools whose advice in 2008, again probably because JK was not doing enough about it, (and on TV - these people showed they had the balls) was "housing will crash so get out asap).
Seeing as John Key is at the helm of the party that refuses to acknowledge there is a housing crisis, that changed the investor category for potential immigrants to include residential housing, that refuses to ban foreign buyers and has stitched all future governments up to not being able to either, that refuses to anything about investors and speculators in the market to better level the playing field for homeowners, that refuses to slow immigration till we catch up on things (I could go on but need to get ready for work) then I, for one, will absolutely and utterly blame him for the situation that people are finding themselves in, in this country.
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