PHOTO: CoreLogic
The Reserve Bank (RBNZ) has reported that mortgage lending flows in April were about 50% lower than a year ago, with refinancing likely to have fallen less than new loans and transfers from other lenders. The shift to interest-only lending, which started in March, continued in April too. Since we moved down from alert level four, however, momentum in buyer and seller activity has started to rebound, so May should be a better month for mortgage lending – borrowers are certainly benefiting from the latest round of rate ‘wars’.
Given that the alert level four lockdown covered most of last month, April’s mortgage lending figures from the Reserve Bank were always going to be very interesting (and hard to predict) – and they certainly didn’t disappoint.
For April there was only $2.7bn of mortgage lending, down sharply from the figure of almost $5.5bn in the same month last year. Lending to both owner-occupiers and investors fell sharply last month (see the first chart). We don’t get the breakdown from these RBNZ figures, but it seems likely that transfers from other lenders and new mortgages would have both fallen more sharply than refinancing of existing loans (this is certainly the result shown by CoreLogic’s internal mortgage data collection). After all, remember that property sales fell by around 80% in April, but there’s always the normal flow of existing fixed loans rolling over.
Looking at the detail around loan to value ratios (LVRs), the figures didn’t change much in April – as the second chart shows, high LVR lending to both owner-occupiers and investors stayed well below the speed limits. Given the temporary removal of the LVR speed limits from 1st May, it’s conceivable that the next release (due 25th June) will show a rise in high LVR lending – but any rise will probably be minor. After all, the banks themselves will be sticking to cautious lending policies, even if the RBNZ isn’t mandating that approach.
READ MORE VIA CORELOGIC
