The first home buyers (FHBs) are continuing to make their presence strongly felt in the mortgage market - even as overall levels of mortgage advances still languish in the wake of the buying frenzy in 2020-21.
Latest mortgage lending by borrower type figures for October from the Reserve Bank (RBNZ) show that of the $5.588 billion total advanced in the month, some $1.219 billion (21.8% of the total) was to the FHB grouping.
That's easily a new record high percentage in a data series that's been published since 2014, beating the previous high of just 20.8% set in August of this year.
The ascent of the FHBs came as investor interest continued to lag (after its huge surge in 2020 after the loan to value ratio - or LVR - restrictions had been removed). The investors borrowed just $909 million in October, which was 16.3% of the total - although this was slightly up on the 15.8% share for this grouping in September.
The total amount borrowed in October of $5.588 billion is a long way shy of the over $7.7 billion borrowed in the same month in both 2020 and 2021. We need to look back to October 2018 to find a smaller (very slightly) total of monies advanced in an October.
The latest October figures do show an increase on the September 2022 figures, which were $5.135 billion. It might be expected that there would in any case be a seasonal uptick, but the RBNZ suggests the rise was a little more than that.
In its summary of the latest data, the RBNZ says on a seasonally-adjusted basis the October 2022 figures were up 6.2% from September.
The RBNZ said the average value of new mortgage commitments across all borrower types rose this month, following four consecutive monthly decreases, up 4.9% from $352,243 in September to $369,626 in October. The average loan size across all borrower types was up 0.1% annually.
There were 15,118 new mortgage commitments in October, up 3.7% from 14,578 in September. Compared with October 2021, the number of new mortgage commitments were down 27.7% from 20,905.
The RBNZ said October 2022 had the lowest number of commitments for a month of October since the data series started.
That's been a familiar story this year.
The monetary amounts have been down across the board, although not necessarily strikingly so. But the fact is the mortgage size is so much bigger now than it was two years ago that perhaps looking at the numbers of mortgages issued is a more salient measure of the state of the market than the overall dollar amounts.
The RBNZ said on Wednesday it was now expecting the house market to drop 20% from peak (November 2021) to trough.
And of course on Wednesday the RBNZ lifted the Official Cash Rate by a record 75 basis points to 4.25%.
And of course the RBNZ's conceded it is deliberately engineering a recession - which it's forecasting to begin in mid 2023.
It will be interesting to see how the mortgage market fares over the summer months. At the moment it's being supported by the unbreakable FHBs.
The RBNZ provided this summary of the latest monthly figures.
38 Comments
The first home buyers (FHBs) are continuing to make their presence strongly felt in the mortgage market - even as overall levels of mortgage advances still languish in the wake of the buying frenzy in 2020-21.
Time for the young people to get in behind their country. In the immortal lyrics of 'And the Band Played Waltzing Matilda':
When I was a young man I carried my pack
And I lived the free life of a rover
From the Murrays green basin to the dusty outback
I waltzed my Matilda all over
Then in nineteen fifteen my country said Son
It's time to stop rambling 'cause there's work to be
done
So they gave me a tin hat and they gave me a gun
And they sent me away to the war
What do people not understand, The RBNZ have said they are engineering a recession,
If 5.5% ocr does not do it, they will keep raising the OCR until they get their recession.
It is not the time to buy a house at these price levels.
Collectively, it seems, that the central bankers of the world have decided to pop the bubble now, before it gets any bigger. Lets hope they are not already to late.
We are not going to hear much more from TTP. RIP.
He may play the Combover and Church, I was only making an educated guess card, but I think TTP is too stubborn to do so, he is more likely to rejoin the conversation with a new userID
He does seem to perhaps have found a new God.
In 2021 1.326 billion was lent to 1763 borrowers at DTI of >7. That is an average of 752,000 each.
Which makes the average income best case 107k to service the loan. What happens when these people have to refix at 7% ? That is just the tip of this cluster F%^$$%n iceberg.
Potential fist home buyers just need to wait patiently.
Banks use test rates as a stress test for borrowers, with the purpose being to ensure borrowers can manage higher interest rates.
I wonder what test rates were in 2007 when the average 2 year rate was 9.6%? And why was the average test rate 5.8% in 2021?
The cluster F%^$$%n iceberg has 2021 test rates starting with a 5 and 2022 mortgage rates starting with a 6.
I agree, the people that are not able to buy a house are still in the same position, many bought before the prices skyrocketed and also had near zero rates for a couple of years to start paying it down. The RBNZ are going to be privy to all the numbers, they know the choke point so a few will get sacrificed.
Like I said. Just the tip of the iceberg. But that always melts first and will drip over everyone like Chinese water torture. Here's another stat for 2021. Loans to owner occupiers that also had investment property as collateral with a DTI >9. 1.46 billion to 1552 borrowers. That 940k average for the house they live in. F knows what they owe on their rentals.
940k needs $65,800 per year to service interest at 7%. That means 86K per year of gross salary just to pay the interest.
It is an absolute cluster f$#@%k.
And we are so used to continually being propped up that any government (red or blue) will be unable to resist trying to swoop in and "save" borrowers.
This will not only take down our economy. It will eventually also take down our dollar.
5 mOrr years.
FHB's and lending will drop off. It's near on impossible to borrow money from the bank these days, income needs to be substantial. Anything above a DTI of 4 doesn't work, and this will only reduce as the servicing test rates increase. Under the current criteria many people cannot afford their current lending let alone additional lending (according to the bank tests)
Mortgages may be dominant with FHB but we must factor in also that many will buying outright or with a more substantial deposit thanks to the bank of the boomers, sorry, I mean mum and dad. This will somewhat shelter many from the larger interest rates and still allow them to survive the coming economic storm. We may be seeing the beginning of the elongated wealth transfer form the baby boomers to their children, starting with the house deposit.
I took a quick look at Auckland Auction results. It looks like the market has turned pretty quickly! There are some crazy prices vs. CV starting to pop up. I have ignored $2.5M+ as I think it is a completely different world (but there are big results going either way of CV in that market too).
Just in the last week (since Monday), there have been:
- 6 properties have sold for greater than -20% below CV
- 13 properties have sold for greater than -10% below CV (including the 6 above obviously)
- 66% of properties are selling below CV
- The average price has been -8% vs. CV
So when FHB's cant buy, people complain about housing prices and about greedy people/landlords/existing homeowners. And now when details immerge that FHB's worked hard, saved up, and are taking out mortgages to buy their first home, people say things "lambs to the slaughter".
Really? Bi-polar a bit guys?
-7
I think you've misinterpreted the meaning there a little, 7jai.
The first part is about concern for FHBs and the limited availability, and thus high prices, of suitable housing stock due to an unequal ability to obtain credit compared to existing home-owners and investors - regardless of ability to service a mortgage. Yes, there is the outrage at the people who benefit most from the system, which could be considered quite justified given the unfairness of the situation, (and for balance, many of those people aren't investing in housing to dick FHBs out of homes, but to further their own financial situation using the advantages available to them) - but that doesn't make the positions inconsistent.
"Lambs to the slaughter" is talking about the innocence of those who are willingly putting themselves, likely out of ignorance, in a situation where in the near future they will be in negative equity with possibly much higher servicing costs. The risk of losing their home, and the equity they worked so hard to achieve, in the face of an adverse event is ridiculously high, and this saying reflects that.
Both are out of concern for the FHBs, but for different reasons. And concern for others is not a mental disorder.
"The RBNZ said October 2022 had the lowest number of commitments for a month of October since the data series started."
You! Yes, you behind the bike stands ,Stand still laddy! (Roger Waters) Hard to see much happening when the RB is bent towards stagnating spending. Market confidence probably preparing to plumb new lows...quite logical to assume folk will tighten their belts. There are some however that will be patiently waiting for the planets to align so they can make their move , likely they wont be rushing in until they are confident the hiking cycle has ended and even then the rates will need to drop significantly from their peaks, so it could be a longer journey than many anticipate. Stand still laddy.....lol
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