The banks will be hoping this is a year of 'two halves' for new mortgage activity after a start to the year that was the slowest in at least nine years

Well, the country's banks will be hoping that, in sporting parlance, this year turns out to be a 'game of two halves'. Because in terms of new mortgage activity, the first half wasn't much chop.

The Reserve Bank's granular monthly mortgage data has only been published since the second half of 2014. That means that in terms of looking at performance of the market in the first six months of years, we only have data going back to 2015 - that's now nine years' worth.

And the first half of the year has been very easily the slowest in that time. So, we can say with every confidence it's been the slowest start to the year for nine years - and in reality it's probably longer than that.

There's some fascinating stuff in the detail. It shows that investor activity has fallen off the proverbial cliff, which you may well have realised. But you might be surprised by the extent of that.

The other thing of very significant note is the activity levels of the first home buyers. We've kept highlighting the fact that the FHBs have remained strong in the market when others have been sitting on the sidelines.

It's easy enough therefore to draw the conclusion that the strength of the FHBs is a relative thing only. Hmmm...to some extent, yes. But what if I said that by whichever criteria you choose to judge, the FHBs have been MORE active in the market this year than they were in 2016 - which in terms of overall mortgage activity is much the strongest in the data set?

In short:

• Overall mortgage figures have been much the lowest for a first half of the year.
• Investor mortgage figures are much the lowest for a first half of the year.
• Other owner-occupier mortgage figures are much the lowest for a first half of the year.
• FHBs actually had the second-highest figure they've recorded for the first half of the year.

Okay, so what have we got in terms of the detail?

Taking the overall mortgage figures for the first six months of the year, we can see that new mortgages to a total value of $28.522 billion were signed up for. This figure includes all mortgages, whether they be to FHBs, investors, or other owner-occupiers. And yes, that IS the lowest. The previous lowest was $29.588 billion in 2017.

Because this is a relatively small sample size - IE just nine years - I'll use the median figure for comparison rather than averages. This is principally because 2021 was just such an out-there year, particularly the first six months, that the figures for that year would blow the averages out. 

For the record there was $50.381 billion worth of mortgages signed up for in the first half of 2021! That's nearly $8.4 billion a month - remembering that for a long time the record for ANY month (before the 2020-21 period) was under $8 billion!

So, the median figure we get across those nine years is $31.981 billion. By that comparison then, our latest year's figure of $28.522 billion does not look all that bad. 

However, as readers often note, we need to look at the numbers of mortgages as well. That's because the average size of mortgage has increased so much. For example in the first half of 2015 the average-sized mortgage was $194,000. This year so far it's been $354,000.

Okay, so numbers.

In the first six months of this year there were a total (for all types of borrower) of 80,645 new mortgages signed up for. Yes, it's the lowest. The previous lowest was 90,997 in the first six months of 2022. The median figure since 2015 is 138,757.

So, the latest year's figure to date is about 42% below the median number of mortgages taken out in the first six months of a year since 2015.

The highest number of mortgages taken out in total in the first six months of a year was in 2016 - when there were 189,722, so comfortably more than double the number of mortgages taken out so far this year.

How about the break-down of borrower type then?

Well, we'll start with investors. As I say, there's been plenty of chatter about them being on the sidelines, but boy, do these figures graphically illustrate that!

In the first half of this year investors borrowed $4.767 billion. Yep, it's the lowest. The previous lowest was $5.855 billion in the first half of 2020 - remembering that those six months basically 'lost' April to the pandemic lockdown.

The median figure since 2015 for investors over the first six months of a year is $7.156 billion, while the highest - and this might surprise you - was in 2016, when $12.107 billion was borrowed. You might recall that if was after the first six months of 2016 that the RBNZ lost its temper and slapped a 40% deposit rule on the investors. Apart from a bit of a drunken romp (after the loan to value ratio limits were removed in May 2020) and which saw investors record $10.37 billion of mortgages in the first half of 2021, the investors have not been quite the same since.

And the numbers?

In the first half of this year investors have signed up for just 9750 mortgages, which is by a long way the lowest number, with the previous low being 11,660 only last year. The median number is 21,241, which is more than double this year's figure, while the highest ever (oh, yes, 2016) was over three-and-a-half times more at 35,204.

The 'other owner-occupiers' (excluding FHBs) is perhaps a category we don't look at enough, since it is in fact much the largest category. Well, let's look at them now.

The OOOs as we can perhaps ingloriously label them borrowed $16.777 billion in the first six months of this year. And, yep, that's the lowest, beating the previous low of $17.403 billion, which again would have been pandemic-affected in the first half of 2020. The median figure is $18.895 billion. The highest total was a thumping $30,571 billion during that pandemic buyfest in 2021.

In terms of numbers, there were 57,695 mortgages signed up for by the OOOs in the first half of 2023. The previous low was 66,898 in 2022. The median is 102,486 and the highest number (sorry, no chocolate fishes for guessing it was 2016) was 140,110. So, perhaps for the OOOs the slump has not been quite as extreme as for the investors, but, its fairly extreme.

What then of the FHBs?

In the first half of this year they've borrowed $6.556 billion. Lowest ever? Oh, no. Not even close. The lowest figure for the FHBs was less than half that, at $3.142 billion in 2015. When everybody else was buying up large in 2016 the FHBs borrowed just $4.163 billion in the first half. The RBNZ has conceded that its first iteration of loan to value ratio limits imposed in 2013 did disadvantage the FHBs.

The highest amount borrowed by the FHBs in the first half of a year was in 2021, when the figure was $8.966 billion.

But the $6.556 billion borrowed in the first half of this year is the SECOND-highest figure for the FHBs - at a time when the other categories of borrower are recording their lowest figures. And the latest figure is also ahead of the median figure, which was $5.339 billion.

So, the numbers of mortgages?

FHBs took out 11,845 mortgages in the first half of this year. And that figure is in fact the new median - IE it is both the fifth highest and fifth lowest number of the nine years in this data set. The lowest number of mortgages taken out by FHBs in the first half of a year was 9887 in 2015. The highest - and it was the highest by more than 3000 - was during 2021, with 16,792 FHB mortgages signed up for.

There we are then. A first half of the year that has left the banks wistfully remembering the 'good old days' of 2021, while the FHBs have just kept on doing what they crave to do - buy a house.

Will the second half of the year be more active? There are plenty of people prepared to say it will be. But let's wait and see. Large volumes of talk does not necessarily equate to large volume of mortgages and house sales.