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Interest-only lending contained: CoreLogic

Interest-only lending accounted for just 30% of mortgage lending in December, significantly down on historical lows, as banks keep a lid on "risky" lending. 

Wednesday, January 30th 2019, 3:35PM

In its latest weekly update, real estate researcher CoreLogic notes interest-only lending is way down from historical peaks of roughly 40%. Interest-only lending investors and owner-occupiers has fallen steadily since January 2016, according to RBNZ data.

CoreLogic senior research analyst Kelvin Davidson (pictured), says the low figure indicates banks have "contained" interest-only facilities, despite recent moves from Australian regulators to loosen IO restrictions.

In December, the Australian Prudential Regulation Authority relaxed interest-only restrictions, which had limited the facilities to 30% of overall mortgage lending. The move was designed to breathe some life into the Aussie market, which has plummeted in major centres like Sydney and Melbourne. 

Advisers believe Australian restrictions have influenced New Zealand's major banks in recent years, with the big four Australian-owned. They hope loosened rules will lead to a more receptive attitude from New Zealand banks.

Yet Davidson sees no sign of New Zealand's lenders loosening up on interest-only. He believes the interest-only tightening will stabilise the market. He adds: "It was reassuring to see that ‘risky’ interest-only lending is contained. The share of lending done on interest-only terms is holding below 30%, well down on previous peaks of more than 40%. It’s the investor share of interest-only lending that has really driven the drop in the overall figure over that period, although there’s also been less interest-only lending to owner-occupiers”.

Davidson told TMM he'd be "surprised" if there was a resurgence in interest-only lending. "The general conditions are that banks are pretty cautious about risky lending. They have been given more leeway on LVR but haven't taken that up yet. There's a really cautious attitude," he added. 

Tags: CoreLogic Lending

« Investors struggle as first home buyers catch upNon-bank mortgage lending soars in 2018 »

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 3.55 3.89 3.99
AIA Special - 3.05 3.39 3.69
ANZ 4.44 3.29 3.45 3.85
ANZ Special - 2.79 2.95 3.35
ASB Bank 4.45 3.35 3.19 3.85
ASB Bank Special - 2.85 2.69 3.35
Bluestone 4.44 4.44 4.29 4.34
BNZ - Classic - 2.79 ▼2.69 2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 ▼3.39 ▼3.29 ▼3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 2.80 3.15 3.19
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Lender Flt 1yr 2yr 3yr
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.80 2.89 3.50
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 4.40 2.95 2.95 3.69
Kainga Ora 4.43 ▼3.29 ▼3.39 ▼3.85
Kiwibank 4.40 3.74 4.14 4.40
Kiwibank - Capped - - - -
Kiwibank - Offset 4.40 - - -
Kiwibank Special - 2.65 2.79 3.25
Liberty 5.69 - - -
Lender Flt 1yr 2yr 3yr
Napier Building Society - - - -
Nelson Building Society 4.95 3.75 3.99 -
Pepper Essential 5.18 - 4.98 4.98
Resimac 3.49 3.45 3.39 3.69
RESIMAC Special - - - -
SBS Bank 4.54 4.85 5.05 5.49
SBS Bank Special - 2.99 3.05 3.69
The Co-operative Bank - Owner Occ 4.40 ▼2.79 ▼2.95 ▼3.39
The Co-operative Bank - Standard 4.40 ▼3.29 ▼3.45 ▼3.89
TSB Bank 5.34 3.59 ▼3.59 4.19
TSB Special 4.54 2.79 ▼2.79 3.39
Lender Flt 1yr 2yr 3yr
Wairarapa Building Society 4.99 3.95 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - 2.79 ▼2.69 ▼2.79
Median 4.55 3.32 3.39 3.69

Last updated: 28 May 2020 10:38am

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