Around one in five of new owner-occupier mortgages uplifted in July were on a fixed term of just six months, as home owners bet - successfully - on imminent interest rate cuts.
At the other end of the scale, the previously popular two-year fixed rate term has been for now virtually abandoned.
The July figures are the culmination of a trend developing from the turn of the year that has seen mortgage holders go shorter and shorter with their fixed terms as they anticipated falls in interest rates.
Such falls were forthcoming from banks during July, particularly after a 'dovish pivot' during that month by the Reserve Bank, which pointed to Official Cash Rates coming much earlier than the RBNZ had previously indicated.
Following that of course we've had an actual cut in the OCR, from 5.5% to 5.25% on August 14 and with probably two more cuts expected by the end of the year.
This means those gambling in July on being able to get lower rates in six months' time look to be on a good thing.
Whether the RBNZ might be concerned about the 'quick transmission' of its OCR cuts into renewed economic activity and therefore actually pause those cuts is something economists are already pondering on.
The RBNZ's latest figures outlining the fixed rate term durations of newly uplifted mortgages show that for owner occupiers taking up mortgages in May the share on six-month fixed terms rose to a new historical high of 19.4%, up from 15.4% in June.
This has been a stunning rise to popularity of a term that was previously very unfashionable. Go back to July 2023 and the share of new owner-occupier mortgage money on six month terms was just 4.4%. Go back to July 2022 and it was a mere 2.8%.
But if one thing goes up another must come down. Two years ago in July 2022 the two-year fixed rate mortgages accounted for a third of all the mortgages. That had dropped to 22% as of July 2023 and now in July 2024 it's fallen to a new low of just 6.1%.
Meanwhile for investors, the figures for six-month fixed terms rose to a new high of 23.3%.
The always-popular one-year terms did remain the most popular in July for both owner-occupiers and investors.
As referred to above, the RBNZ introduced the C71 data series, which details mortgages as they are actually drawn down and for what terms they are fixed for last year. It only goes back as far as 2021, but offers interesting insight into what the borrowers are thinking - and also shows to some extent what offers the banks have been pushing at various times.
According to the RBNZ's summary of the latest data, total residential mortgage lending was $6.6 billion in July, up 20.9% from $5.5 billion in June.
The share of total new residential lending on fixed interest rate terms held at 82.4%.
New owner occupier lending increased by 18.6% to $4.8 billion in July.
One-year fixed terms continued to be the most popular term of owner occupier lending, accounting for 39.0% of all new lending, up from 37.1% in June.
10 Comments
Recent headlines tend to be "Houses are not selling" "Slump in buyers" "prices are crashing"
No headline of "borrowing up a massive 20% over just a one month period to $6.6 Billion "
Now that was July, before any rates cuts. It will be interesting to see how much new borrowing occurred in August.
Currently in Europe and I confirm that housing in New Zealand is actually not expensive compared to here.
Also spoke to several from the United States and their housing is also no cheaper in cities there.
Get over it and stop thinking that things are going to improve if you do not currently own.
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