PHOTO: Mortgage lending. FILE

The housing loan market has been relatively subdued over the past 12-18 months, alongside a downturn in sales volumes and property prices. But there are now signs of a turnaround for those variables with lending activity starting to rise. So what’s the current lie of the land and things to keep in mind? Chief Property Economist, Kelvin Davidson shares 10 key insights you need to know about mortgage debt across the country right now.

  • The Reserve Bank figures show gross new lending flows for house purchases, bank switches and loan top-ups over August-October were 4% higher than a year ago. However, the total of $16.8bn was still well below the figures for the same period in both 2020 and 2021, which were $21.9bn and $22.8bn respectively.
  • Loan to value ratio rules are still biting fairly hard. Only 0.3% of investors got a loan in October with less than a 35% deposit, and only about 7% of all owner-occupiers (FHBs and existing owners) borrowed at less than a 20% deposit. The allowable cap, or speed limit for low deposit owner-occupier lending is 15%.
  • First home buyers (FHBs) are capitalising on the speed limit. Around one-third of FHBs secured a loan at low deposit (or high LVR) in October, and the buyer group has accounted for 70-80% of all owner-occupier lending at a low deposit. See figure 1 below.

Figure 1. High LVR first home buyer lending (Source: RBNZ)

  • FHBs are also taking out relatively large property purchase loans. In October, the average was just short of $562,000, versus the investor figure of around $493,000.
  • ‘Risky’ lending is not much of a problem at present. Around 17% of lending in October was interest-only (versus figures of as much as 40% in the past), and loans at debt to income (DTI) ratios of at least seven are also ‘under control’. That DTI bucket has accounted for only about 1% of FHB loans recently, and less than 8% for investors.
  • Industry-wide, a ‘special’ (high equity) one-year fix rate is about 7.3% and the two year rate is roughly 7%. The lows for those rates were 2.2% and 2.6%, respectively. Across the stock of existing debt, the average mortgage rate is 5.3%, up from the trough of 2.7%, but still well below prevailing market rates.
  • New Zealand’s mortgage debt currently stands at $354bn and the estimated value of our property stock is $1,585bn. That’s an aggregate LVR of only around 22%, implying there’s a lot equity out there (at least on paper).
  • Mortgage repricing is ongoing and will remain a key issue 2024. More than half of current loans are fixed but due to be repriced in the next 12 months, and which many will see higher mortgage rates.
  • Non-performing mortgages remain very low, at less than 0.5% of the value of debt. CoreLogic data also shows that mortgage sales are at low levels too. See figure 2 below.

    Figure 2. Mortgagee sales per quarter (Source: CoreLogic)


  • The books show many existing mortgage-holders are ahead on their repayments. According to Westpac data, nearly two-thirds of borrowers are at least three months in the black, with a median buffer of nearly $13,000. This pattern is likely to apply across other bank lenders. Recent Centrix data also shows that there are around 19,000 mortgage accounts past due – up by 25% from a year ago, but from a very low base.