Downbound trend for investor lending

There is now little doubt that the new LVR restrictions are having a significant impact on property investor activity, with lending in this area slumping to new lows.

Thursday, November 24th 2016, 4:49PM

by Miriam Bell

The Reserve Bank’s October residential mortgage lending data covers the first official month that the LVR requirement for investors to have a 40% deposit has been in force.

It reveals that there has been another big decline in both overall lending and investors’ share of lending.

However, it should be noted that there has been a declining trend in investor lending, as well as overall lending, since May this year.

In October, total new lending came in at $5.37 billion. This was down from $5.83 billion in September.

Investors accounted for $1.45 billion of October’s new lending. That’s a significant drop on the $1.74 billion share of new lending they had in September.

Other owner-occupiers remained responsible for the biggest share of new lending in October, with $3.09 billion. But this amount was down on the $3.30 billion they borrowed in September.

However, first home buyers seem to be taking advantage of the diminished investor presence in the market.

Their share of new lending increased to $768 million in October, as compared to $718 million in September.

After halving between August and September, the amount of higher than 80% LVR lending to investors dropped even further in October.

It came in at $9 million, as compared to $15 million in September. This stands in stark contrast to June when investors accounted for $50 million in higher than 80% LVR lending.

Higher than 80% LVR lending dropped across the board, but the decrease was most noticeable for the investor group.

Not surprisingly, higher than 70% LVR lending to investors also dropped significantly in October. It was down to $18 million from $337 million in September.

Meanwhile, the downward trend for investor lending was also apparent in the Reserve Bank’s data on the Auckland vs non-Auckland market.

In October, new lending in Auckland was down for both investors and non-investors.

Auckland investors accounted for $1.10 billion, as compared to $1.23 billion in September, while Auckland non-investors accounted for $1.67 billion, as compared to $1.84 billion in September.

Non-Auckland lending dropped to $2.60 billion in October, as compared to $2.76 billion in September.

The same story was repeated in the Reserve Bank’s lending by payment type data, which looks at interest-only and principal-and-interest loans.

Interest-only loans accounted for $1.90 billion of total new lending in October, while principal-and-interest loans accounted for $3.47 billion. Both figures were down on September.

While interest-only loans to both investors and owner-occupiers (including first home buyers) dropped, again it was the amount of interest only lending to investors which fell the most.

Investors accounted for $770 million of interest-only loans in October, as compared to $948 million in September. This amount is down to nearly half of June’s figure of $1.42 billion.

Housing market commentators agree that investor activity has quietened down in response to the new LVR requirements, but most question how long the quieter times will last.

 

Tags: banks Lending LVR Macro Prudential Tools mortgages RBNZ Reserve Bank

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