Annual growth in housing loans decelerated to its slowest rate in almost five years in February, figures from the Reserve Bank of New Zealand show.
This is likely to please the Reserve Bank, which is hoping to suck some of the inflation heat out of the housing market, but it is another sign that consumers are shying away from taking on extra debt to fuel retail spending.
Fresh data from the Reserve Bank in its C5 Sector Credit aggregates show home lending growth slowed to an annual rate of 12.1% in February from 12.3% in January and is now down from a peak of 14.4% in April, May and June last year.
It is the slowest growth rate since 11.5% seen in May 2005, when the boom in house prices and bank lending was getting into full swing.
Now that house prices have stopped rising and house sales volumes are down around 30-40% from a year ago, home lending is also slowing, but not as quickly as some might expect given the sharp slow down in the amount of real estate transactions.
There was NZ$1.22 billion worth of new home loans issued in February, which was up from the NZ$1.11 billion issued in January and the NZ$1.12 billion issued in December. It was however down 23% from the NZ$1.6 billion lent in November and down 17.6% from the NZ$1.48 billion lent in February last year.
Home lending is certainly not slowing as fast as the housing market itself, suggesting that there is still considerable equity withdrawal going on, particularly as interest rates rise and home owners under disposable income stress increase their use of revolving equity or line of credit mortgages to eat into their home equity simply to pay the mortgage.
Signs of a dive in business confidence have, however, failed to show through in business lending growth. Business lending growth accelerated to 12.2% from a year ago in February from 12% in the month of January from a year ago. Bank lending is taking almost all the market, with non-bank financiers such as finance companies having almost completely stopped new lending as their own funding sources dry up.
Non-bank lending to businesses, which includes lending by finance companies, credit unions and building societies, fell NZ$86 million to NZ$8.886 billion, while lending by banks rose NZ$849 million to NZ$62.867 billion. Bank lending is up 14% from a year ago, while non-bank lending is up 1.1%.
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