2013 ends with evidence of lower bank switching activity even as we are borrowing more on our houses

The trend of a spike of 'new' mortgages being approved just before the holiday break, but at lower values, is evident again this year, according to the latest data released by the RBNZ.

In the week ending December 13, the average mortgage being approved was $168,600 and this was just $1,100 more than for the equivalent week a year earlier.

But that is almost 11% below the average value approved in late September.

7,241 mortgages were approved, and that means approval levels were at about the same rate as a year ago, but a full 10% lower than the rate in the preceding quarter.

Mortgage approval data counts 'new' mortgages approved by banks but not roll-overs at the same institution. As such, it covers borrowers who decide to switch banks.

Because November house sales volumes were down 6.6% on the same month a year earlier (and the REINZ data counts these transactions when they go unconditional, rather than when they settle), the proportion of actual house sales in the mortgage approvals data will be lower this year than last - and the proportion of mortgage 'shopping around' will have been higher. This will likely account for the decline in average values approved.

As first home buyers get squeezed out of the market, their big new full-borrowing profiles wane in this data.

Higher house prices are driven by lower supply from buyers who are already cashed up, it appears.

This 'new approvals' data is unlikely to cover much 'top-up' activity, where borrowers add to their loans to fund smaller discretionary purchases (like renovations, cars and holidays). And there could be much more of this activity than is revealed in these mortgage approvals stats. Housing credit is growing faster than it has in five year - up 6% - strongly suggesting it is top-up activity driving the growth.

Together, the implication from these data sets suggests New Zealand borrowers are shopping around less in 2013, and this in turn is supported by higher recorded levels of 'satisfaction' in our banks.