Reserve Bank data show mortgage cuts stimulating activity
The latest mortgage approvals data suggest banks slashing their fixed-rate mortgage rates is stimulating housing market activity even as older data shows credit growth ticking slightly higher.
Thursday, May 31st 2012, 4:55PM
by Jenny Ruth
The latest Reserve Bank figures show there were 7,435 mortgages approved in the week ended May 25, up from 7,026 the previous week, and that was the highest level since the week ended June 12, 2009.
Household credit growth rose a seasonally adjusted 0.2% in April, the same as in March and an improvement of the zero to 0.1% growth seen in the previous seven months.
Floating rate mortgages held by registered banks rose to 63.1% of total mortgages in April from 62.6% in March and compared with just 33% in April 2010.
"Credit growth is sill subdued but it's ticking a bit higher," says Doug Steel at Bank of New Zealand, adding mortgage approvals are definitely ramping up.
"Low interest rates have got to be part of it and also a bit of pent up demand," Steel says.
Darren Gibbs at Deutsche Bank says some of the uptick in mortgage approvals will be people switching banks but annecdotal evidence still suggests the housing market is faring reasonably well.
New Zealanders are obviously still keen on saving though: retail term deposits were up 7.6% in April on a year earlier.
While the annual growth rate has been declining from the 10.2% annual growth shown in November last year, Steel says that's partly because its scaling strong year-earlier increases.
Back in 2010, annual growth rattes in term deposits ranged from as low as 1.3% in February up to 5.9% in December.
Nevertheless, Chris Green at First NZ Capital says domestic data is being overshadowed by developments in Europe and the potential fallout in New Zealand which are much more likely to influence Reserve Bank thinking.
Gibbs says while local data shows "there's no obvious need for the Reserve Bank to cut rates at this point," wholesale financial markets continue to price in at least a 25 basis point cut in the official cash rate (OCR) before the end of the year.
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