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Source: MIL-OSI Submissions
Source: CoreLogic

Despite August being affected by the latest round of social restrictions, mortgage lending activity showed no clear effects. Indeed, lending flows last month were again significantly higher than a year earlier, with low mortgage rates clearly still playing a key role in boosting activity. The end of the wage subsidy and the prospect of higher unemployment needs to continue to be watched closely, but there doesn’t seem to be too much else on the horizon that might slow mortgage lending activity markedly over the next few months.

After a bumper level of activity in July, today’s mortgage lending figures from the Reserve Bank (RBNZ) showed that banks followed it up with another busy month in August. There was about $6.8bn of new lending last month, up by around $1.4bn from the same time a year ago, and a continuation of the strong rebound from April and May’s (enforced) weakness – see the first chart. Given the move back up the alert levels on 12th August, you’d be forgiven for thinking that lending activity might have been much weaker than it has turned out to have been.

The breakdown of the figures showed that interest-only lending has stabilised, sitting at 25-26% of the total for the past three months now (still much lower than figures of about 40% in 2015-16). Meanwhile, even though the loan to value ratio (LVR) speed limits have been temporarily removed, the share of lending at >80% LVR has also tailed off a bit, sitting at 11.2% in August (see the second chart). In addition, the banks continue to scrutinise borrowers’ income and expenses very closely.