New Home Loans Rise Despite Economic Conditions

The number of new home loans increased by nearly 30% in the six months to December 2023 according to retail banking insights released today by the New Zealand Banking Association.

There were 52,504 new home loans from June to December, which is an increase of 29.8% compared to 40,438 new loans in the previous six months. Of the new loans, 26.3% went to first home buyers, with the rest going to existing customers opening new loans, for example, to move a new house, to borrow for renovations or split existing debt into new loans. New loans do not include borrowers topping up an existing loan.

New Zealand Banking Association chief executive Roger Beaumont says: “The increase in new home loans is quite surprising in the current economy where interest rates have risen significantly off historically low rates. It shows activity in the market is holding up despite the cost of borrowing rising to help combat inflation, and many New Zealanders experiencing financial challenges. It also bucks the downward trend in the previous six months, when new home loans were down around 11%.”

The average home loan value for first home buyers was $476,919, a decrease of 12.7% compared to the previous six months. “This shows that first home buyers make up a good proportion of new home loans and, due to housing market conditions, they don’t need to borrow as much as previously, which is good news for people getting into their first home.

In December 2023 there were 1.31 million home loans across 1.1 million customers. The average value of all home loans was $322,614. In that period 16,167 home loans switched from principal and interest repayments to interest-only, up from 11,090 in the previous six months.

“Savers are making the most of raised interest rates, which is not surprising, with the average interest rate on term deposits sitting at 5.8%” says Beaumont. The average interest rate on savings accounts in the period was 3.6%.

The value of term deposits increased by 11.1% to $171 billion, with an average balance $105,904.

The full set of retail banking insights for July to December 2023 is available here: https://www.nzba.org.nz/wp-content/uploads/2024/04/Retail-banking-insights-July-to-December-2023.pdf

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