New Zealand Mortgage Approvals Decline 4.9% in August as Investor Activity Dips

The decline in lending is uneven across borrower groups, with investors reducing their activity while first-home buyers maintain their presence in the market.

Lending to property investors fell significantly to $1.398 billion in August, down from $1.565 billion a year earlier, equating to an 11% drop. In contrast, owner-occupiers borrowed $4.231 billion, which represents a 4% decrease.

First-home buyers have shown resilience, securing $1.475 billion in new loans, nearly unchanged from $1.47 billion in August 2022. High loan-to-value ratio (LVR) lending, where borrowers have deposits below 20%, totaled $1.2 billion across all categories, with first-home buyers receiving $815 million of that amount.

According to mortgage advisers, these trends indicate that first-home buyers continue to be active participants in the market, whereas investor caution is increasing, particularly ahead of the upcoming election.

When refinancing is excluded from the data, the annual decline in mortgage approvals is smaller. In August, excluding refinancing, approvals totaled $5.381 billion, reflecting a 3.7% drop year on year, following an 8% decline in July, as per analysis from interest.co.nz.

Both top-ups of existing loans and lending for property purchases fell by 5.8% compared to the same month last year, with purchase lending experiencing a 12.5% annual decline in July.

This reduction in purchase lending aligns with the overall lower market activity; the Real Estate Institute of New Zealand (REINZ) reported 5,430 residential sales in August, down 13% from a year earlier. Homes took a median of 51 days to sell during this period.

Experts indicate that the outlook for the property market remains soft, with households hesitant to incur additional debt. Interest.co.nz suggests that banks could be facing a quiet period for residential lending as summer approaches.

Official forecasts echo these concerns, with the Treasury's Pre-election Economic and Fiscal Update revising down expectations for house prices. The update also projects the official cash rate (OCR) to rise to approximately 3.9% by October 2027, an increase from the previous projection of 3.5%.