By Gareth Vaughan
More home loans were approved last week than in any week since September 2009 with the weekly value the most since April 2009, Reserve Bank data shows.
The Reserve Bank says 7,034 mortgages were approved in the week ending March 16 valued at NZ$1.165 billion.
The last time more than 7,000 mortgages were approved in one week was 7,092 in the week to September 4, 2009. The last time the weekly value was higher was when NZ$1.346 billion worth of mortgages were approved in the week ended April 3, 2009.
The rise in mortgage approvals comes with the Real Estate Institute of New Zealand saying last week there were 6,168 houses sold in February, up 51% from the volume sold in January and up 37% from February 2011. It was the strongest February for sales since February 2008.
However, despite being strong by recent standards, last week's mortgage approvals figures are down on those recorded in the equivalent week of 2007. In the week to March 16, 2007 there were 11,116 mortgages approved valued at NZ$1.542 billion. That week fell during a run of 19 out of 20 consecutive weeks where the value of approvals topped NZ$1 billion with the NZ$1.542 billion of approvals the highest weekly value since the Reserve Bank started tracking the data in October 2003.
By volume, the highest number of weekly approvals was the 11,193 in the week ended December 15, 2006.
Meanwhile, last week's figures were up 17.9% by volume and 40.1% by value annually, based on a comparison of the most recent 13 weeks of data to the same 13 weeks last year.
The Reserve Bank defines a mortgage approval as a firm commitment to provide credit for the purchase of housing, which has been accepted by the borrower. It says a commitment exists once the home loan application is approved, and a loan contract or letter of offer has been issued to the borrower. Seven banks respond to the Reserve Bank's survey, between them representing 99% of registered bank lending for housing, and about 94% of total housing lending.
Included in the data is the refinancing of other banks customers, any loan where the security changes, and any loan where the liability holder changes. Excluded is own customer refinance, business borrowing where the security is the owner’s home, and when the underlying value of a loan is “topped up," with only the topped up portion included. See more detail in the Reserve Bank's description of the data series here
Mortgage approvals
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24 Comments
That growing number of borrowers can't be readers here. They must be optimists.
Don't they know oil runs out next week, the dollar will die, that massive deflation/inflation is just on our doorstep, that we must prepare for a survivalist 7 years, that Iran is about to launch a massive nuclear strike with Russian support, that everyone is about to lose their jobs, etc etc ...
Surely they're not buying houses?! They must be banished to "thought police camps".
This is a clear sign of a pick up in confidence, as well as a clear lack of supply (no need to jump in here Hugh!).
Some people here in Christchurch are looking Northwards but report that prices are already on the rise and out of their range. Great for those long of property in Auckland.....not great for those who are looking for somewhere to live.
But hey, higher interest rates will fix all that :-)
During the noughties, & indeed for decades before, NZ lived way beyond its means.
Then the financial crisis hit in 2008. I thought (& a lot of people were saying) that it would force countries like NZ to stop living on debt, to start deleveraging and move to a savings rather than borrowing culture.
However, I remember reading a commentary about then that suggested that the crisis would roll on for a while. Then it would blow over & we would return to our profligate ways as if nothing had happened.
I remember laughing at it and thinking that was impossible. Once household debt gets to 150% of household income, how could it keep increasing?
It seems I was wrong. More the fool me. I reckoned without the Reserve Bank ensuring that borrowers were rewarded & savers penalised.
Cheers
Why should savers be rewarded when what they are doing is akin to burying their money in a hole in the ground? (as any interest is always eaten up by inflation and tax).
At least people who invest in property 'carefully' are investing in something, and most likely will be increasing its value.
Given that NZs population is predicted to be several millions higher than it is now in the next couple of decades, and it is too expensive to build (thanks to Labour and their compliance costs), smart property investing is a no-brainer, even if it is just your family home.
Bernard finds this very inconvenient.....
Also, looking forward, there is going to be a big pick up in the job market with an expected extra 200,000, half alone coming from the baby-boomers retiring. Sure,there will always be those who only see negatives (and they do seem attracted to this site) but the improving employment situation will underpin the housing market and provide for more prospective ,mortgages etc
Yep, even the Labour Department sees a projected 193,700 new jobs within next 2 years. Look at the age of a lot in the business and professional community- just one example is the large number of 'elderly' who are university lecturers and school teachers aged in their 60's now. And it is a western world phenomenon- the half full glass is going to be overflowing with an enormous number of vacancies looming in the next few tears for us in the next generation!
I've sold up in Auckland, had a commercial property in Dominion Rd and have been investing (5 properties, only 1 a commercial), since 1998 in Tauranga, so hoping growth won't just be confined to Auckland - there is a planned 6,000 tertiary student development for Tauranga underway, it's NZ foremost port now (Auckland is defaulting!), and signs are not so negative anymore over the PSA issue.
Every third house on Ocean Beach Rd at Mt Maunganui seems to be for sale at the moment, so some PIs must be desperately trying to cash up. Houses at Papamoa can actually be quite reasonably priced. You would have to assume that retiring baby-boomers are gong to keep the prices up as the large number of 20-35 year old Kiwis//Brits/Brazilians certainly can't afford to buy.
Who said babyboomers are going to retire. In office jobs, people can work well into their 70's,even up to 80, some even longer, and that is possible as peoples health is better. People do it for the lifestyle, as they don't have much to do if they just retire, and you are more likely to die or get sick if you aren't doing something. I know of a workplace in the education field, where many of the staff are in their 60's and 70's
OK so 7,000 mortgages approved in one week but less than 6,000 homes are selling each month.
So what is behind all these mortgage approvals. Is a renewal of a mortgage or a change to a different bank counted in these figures or are people using this mortgage money to buy new cars, overseas trips, renovations etc?
If a floating mortgage is renewed and then fixed is this counted in the 7,000?
If it is all for purchasing homes then prices will shoot up as there are not enough homes available for 28,000 mortgages per month to be secured against.
A floating mortgage renewal would not be counted. Its pretty obvious though isn't it? There are 7,000 people looking to buy property all with pre-approvals that week, but only 6,000 homes sold.
Pre-approval occurs well before you even put offers on houses - it just means that demand is going up, and its probably going to be a good time to be selling in the next few months, if you're in Auckland.
Say I have a mortgage all floating of $300,000 and obtain approvals to fix $150,000 and float $150,000 - will that be counted as two mortgage approvals?
If I then decide to change bank and do the same split will that also be counted as two approvals?
Therefore 4 approvals but not really any additional mortgage money drawn down?
Banks are pretty keen to attract new business, convince customers to change bank etc even offering up to half a percent off published floating and fixed rates so maybe there is far more people changing bank and that's why the figures are well up.
My own Aussie bank offered to discount my floating mortgage by 0.35% but I may swap to another big Aussie bank that is offering 0.5% on floating and the same on 3 and 4 year fixed.
Really a 5.6% fixed rate for 4 years sounds pretty good to me given an average rate of closer to 9% over the last 10 years.
Have even heard of floating 2% above the 90 day bill rate being offered to some well heeled punters!
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