This is in line with house price falls, the credit bureau says
The size of the average New Zealand home loan dropped by 6.8%, or roughly $25,000, between December and March, in line with falling house prices, according to credit bureau Centrix.
Read more: 30-year-term home loans now the most common – Centrix data
The overall amount lent as home loans also shrunk by nearly a third in March compared to the same period the previous year, meaning less money competing in the market.
“I think the recent dips are showing us that the property market has transitioned into a buyer’s market,” Stuart Baxter, Centrix analytics general manager, told Stuff. “Asking prices have dropped in many regions, which tends to happen in a buyer’s market, as conditions favour buyers over sellers in price negotiations.”
The demand for mortgages was also down by 12% year-on-year in April.
This, and the 30% decline in overall home loan lending, was due to the market tightening and the lingering impact of Credit Contracts and Consumer Finance Act (CCCFA) changes that resulted in more borrowers getting rejected by lenders, Baxter said.
Read next: High credit scorers are now more prone to loan rejection – Centrix
“Late last year the conversion rate on home loan applications were around 40% – so 40% of them were successful,” he told Stuff. “That has now dropped to 34% (in the year to March), which doesn’t sound like a huge drop, but it actually is quite significant.”
In simple terms, if 100 people applied for a home loan last year, 40 would have received a loan. Currently, that figure was down to 34 – meaning six fewer people, or 15% fewer buyers, being approved and therefore competing in the market, Stuff reported.
Despite the government now considering changes to the lending rules to make them less prohibitive for homebuyers, banks said the proposed tweaks still won’t help.
From the $376,000 average mortgage in December, this dropped to $351,000 in March. The average size of home loan to first-home buyers, meanwhile, rose from $500,000 in December to $531,000 in March.
Baxter said it was not obvious what caused the increase, and it could be due to house prices at the lower end of the market holding up better during the market downturn.
Centrix found some more promising signs in its April Credit Indicator report. As Omicron restrictions eased, business credit had started to bounce back, Stuff reported.
Business credit demand fell 7% year-on-year in April, but the average credit score for new applications was up to 771 – a four-point increase from March 2022.
“While defaults are still up year-on-year in certain sectors like agriculture, tourism, and hospitality, the improvement from last month could be signalling a return in business confidence,” Baxter said.
On Sunday, Centrix reported that 40,000 borrowers were behind on at least one payment for a loan after a 5% rise in arrears in the last year, according to Stuff.
