Mortgage lending jumped to $8.18 billion in September with first home buyers, owner-occupiers and investors all opening their wallets
New Zealand's housing market is showing renewed vigour, with mortgage lending jumping across every category of buyer in September. The Reserve Bank's latest data reveals total residential mortgage lending hit $8.18 billion, up from $7.56 billion in August – an uptick that's got both banks and borrowers feeling more confident about the property sector.
First home buyers led the charge with $1.57 billion in new loans, while owner-occupiers borrowed $4.79 billion, indicating that demand extends well beyond market newcomers. Even investors are back in the game, pushing their lending to $1.74 billion after months of sitting on the sidelines.
What's particularly interesting about this surge is its cautious nature. Despite the increased activity, borrowers and banks are keeping risk in check. A hefty $7.11 billion of September's new loans maintained loan-to-valuation ratios at or below 80%, with only $1.07 billion exceeding that threshold. This suggests buyers are bringing decent deposits to the table rather than stretching themselves thin – a notable difference from the frenzied borrowing seen in previous property booms.
Home-secured business lending also declined to just $87 million. Both borrowers and lenders appear wary of overextending, even as residential lending picks up steam.
Strategies of choice for advisers
For those navigating this resurgent market, the big question is around how to structure their mortgage in an environment where rates remain a moving target.
Commenting on strategy in Live at the Nut Bar, Squirrel mortgage adviser Kat McInnes said borrowers are taking increasingly personalised approaches to their lending strategies.
McInnes noted that conservative borrowers, those with tight budgets, or families planning parental leave might benefit from locking in longer-term rates for certainty. Meanwhile, those with higher discretionary incomes who value flexibility might prefer shorter-term fixes that allow them to adapt as market conditions evolve.
"You've got to think about what you're going to be doing within your fixed term. Is your financial position likely to change much? Might you be wanting to move on from your house, renovate, etc? There's lots of things that come into it," McInnes said.
The sweet spot for many borrowers appears to be splitting their mortgage between six-month to one-year rates and longer terms of two to three years – a hedge-your-bets approach that balances flexibility with some certainty. Notably, five-year terms aren't getting much attention despite their availability.
"I think most of us can think 1-2 years into the future, maybe 3,” McInnes said. “It's hard to look out to that five-year mark. As an adviser, 5 years can make us a little bit nervous, just because if there is a change or a drop in rates, break fees on a longer term can be quite significant."
This approach to mortgage structuring runs in parallel with the broader lending trends. Just as borrowers are avoiding risky high-LVR loans, they're also steering clear of inflexible long-term fixes that could prove costly if circumstances change.
The September lending figures suggest a property market finding its feet again, but with lessons learned from previous cycles. For now, we have one more November OCR decision to look forward to, which could see one final sweep of rate reductions for 2025.
