David Hargreaves has a bit of a dive back through the detailed mortgage figures that the Reserve Bank has now been producing for eight years

What has changed in eight years? Nothing. And everything.

That's one instant conclusion that can be drawn from a perusal of Reserve Bank-compiled new mortgage data.

The RBNZ has been publishing the current set of mortgage data since mid-2014, which means we now have eight complete years to have a look at. 

With the January monthly new mortgage data hitting a record low (since the data started) - that's with the exception of the locked-down April 2020 month - it's probably timely to see where we've come from and maybe where we are heading. And so, in we go with a bit of a dive into the detail.

Certainly the January figures suggest that this year's new mortgage lending is going to be a hard grind for the banks. 

Sure, we can say that January's the month in which nothing happens and the figures for that month can maybe be disregarded. But the reality is that the $2.775 billion of new mortgage money in January 2023 was more than $750 million (over 20%) below the previous lowest January figure ($3.533 billion) in 2017. And if we want to talk about the top figure for a January, that was a whopping $6.36 billion in the raging bull days of 2021.

So, this year is going to be a very interesting one to watch develop. The added wrinkle is that it's an election year, which by the nature of it could see some potential house buyers (and sellers) want to sit on the sidelines till they see what the composition of the next Government will be.

But to go back to the beginning and those eight complete years of mortgage data, we can see that for the whole of 2022 new mortgage lending totalled $68.945 billion. Separately, in terms of outstanding mortgages, the mortgage debt 'pile' grew by $14.551 billion (to $345.535 billion). Coincidentally, this is almost identical to 2015's figures, where the new mortgage lending totalled $68.790 billion and the mortgage pile grew $14.536 billion (to $211.028 billion).

Big similarities then - except, not similar at all. Not once you get under the hood. 

In 2015, according to the RBNZ figures, there were 355,798 new mortgages issued. That's still the highest annual tally of mortgages within the eight year period. 

In 2022 there were just 181,016 advanced. So, just over half the number compared with 2015. And that 2022 figure is around 100,000 mortgages fewer than any of the other previous years, in which the numbers have tended to bounce around in a 260,000 to 280,000 range. Yep, it was a quiet year for mortgages, all right. Must have been a pretty unpleasant change of temperature for the banks.

That the overall figure in dollar terms in 2022 was slightly higher than for 2015 was due to the massively bigger mortgage sizes prevailing. The average-sized mortgage through 2022 was $381,000 (the dollar figure averages are rounded), compared with just $193,000 in 2015. So, over 97% higher. 

This is understandable when we look at the REINZ median prices. Nationwide the median was $465,000 in 2015. In December 2022 it was $790,000.

So, as I say at the top of the article, 'nothing' has changed in the past eight years given that the numerical totals for mortgages were virtually identical, but 'everything' has changed when you look at the inputs into those figures. The upshot is a lot fewer people on an annual basis giving themselves much bigger individual financial burdens.

Of course the 2022 figures represented a housing market on the decline, with medians and mortgage sizes falling during the year. In January 2023 the average-sized mortgage was down to $320,000. And it will be very interesting to see what happens to this average figure as the year progresses and as higher interest rates keep biting and as house prices have for now seemingly still further to fall.

Here's a more visual representation of some of what I've just been discussing.

What immediately stands out to me in looking at the figures all laid out like that is, just what happened after 2019? Well, okay, we know the answer don't we?

Up till the end of 2019 the figures were pretty, well, orderly, I guess apart from 2016, which was a hot one. And if we cast our minds back a little we can remember that 2016 was SO hot it was the year the Reserve Bank lost its temper and smacked the landlords with a 40% deposit rule, effectively from around the middle of the year.

The lasting impact of that measure can be seen from the big drop off in mortgages the following year, from which a slow recovery was being experienced, till, bam! Pandemic Time.

Note also the average mortgage size, which moved up gradually from $193,000 to $246,000 from 2015 to 2019, only to then explode to $381,000 as of 2022. Yes, that's a nearly 55% increase in average mortgage size, for new mortgages, during the pandemic as would be buyers tried to keep up with sky-rocketing house prices.

I think to study those pandemic year figures is to realise, fully, just how out of whack our housing and mortgage markets got. And I still wonder whether it may do us lasting damage. 

At the moment as mortgage rates roll over to much, much higher ones, and house prices falter, we seem to be getting away with it. But arguably it is still early days for measuring the true impact, and yes damage, that pandemic buying bender might have caused us.

Anyway, as I say, it will be interesting to see what materialises over the rest of this year. All the signs are that the mortgage figures for 2023 are going to show a big step back from where we've been, helping to highlight even further what an anomaly NZ's pandemic housing market appears to have been.

We managed to keep Covid out for a long time, but arguably caught something rather worse in the bargain! Hopefully it is something we will be able to shake off.

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