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Source: MIL-OSI Submissions
Source: CoreLogic

After returning to parity in June, mortgage lending in July was higher than the same month last year, with advances to both owner-occupiers and investors showing annual growth. Of course, given what we already knew about the positive sentiment around housing in July, it was no surprise that mortgage lending followed suit. However, the latest social restrictions mean that August’s mortgage lending activity is likely to weaken again, and the scope for higher unemployment over the rest of the year suggests that lending flows could remain more subdued too.

According to today’s Reserve Bank (RBNZ) figures there was $6.6bn of new mortgage lending in July, a sharp increase of about $680m from the same month last year – and the first rise on an annual basis since March (note for context that April and May’s figures were each more than $2bn below a year ago). As the first chart shows, lending flows to owner-occupiers and investors in July were both above the levels a year ago.

Lending criteria remain pretty tight, however, with close scrutiny of borrowers’ income and expenses, and still relatively high (albeit falling) internal serviceability interest rate tests. Despite the removal of the loan to value ratio (LVR) speed limits until at least March next year, the proportion of loans being approved at greater than 80% LVR remains at about 12% (see the second chart) – recall that the previous speed limit for owner occupiers, for example, was 20%.