The easing of the loan-to-value-ratio (LVR) restrictions took effect from January 1, but the market is not seeing any clear impact just yet, says one expert.
Mortgage lending flows will probably remain solid in 2019, but any further increase in activity is likely to be slow and steady rather than spectacular, according to CoreLogic research analyst Kelvin Davidson.
His comments follow the release of the Reserve Bank of New Zealand’s (RBNZ) figures, which show an increase in mortgage lending activity in December. Total lending in 2018 was $64.3 billion, up by 8.9% from 2017. He pointed out December figures that revealed a drop in overall figure driven by lesser investor share of interest-only lending.
“To us, this simply reinforces our hunch that the looser speed limits may not produce much of a rise in actual lending in 2019,” Davidson said. “After all, a decent portion of the rise in lending so far seems to have been driven by higher approval rates (mortgage approvals as % of applications), suggesting that only the best borrowers* are coming forward - and it remains to be seen just how many of these high-quality borrowers are left.
“Secondly, the banks are faced with the prospect of having to hold more capital on their balance sheets in future, and that means less ability to lend,” he noted.
Despite this, Davidson added the figures reaffirm that New Zealand’s lending environment is on solid footing, which should help to keep any fears about an Australian-style property market slump hitting NZ in the short term at bay.