Latest Reserve Bank mortgage figures for January - while numerically hitting all kinds of record lows - actually suggest a slight uptick from December on a seasonally-adjusted basis

By David Hargreaves

No doubt the Reserve Bank's January figures for new mortgages make pretty dire reading.

But strangely maybe the figures suggest that the trough in housing activity may have now been passed. Maybe. Don't hold me to that one though. And I would stress I am talking about ACTIVITY - not house prices, which the RBNZ is still forecasting have a way to fall.

Anyway, taken in isolation the latest monthly figures show activity - in a numerical sense - hitting a new low.

However, the RBNZ's summary of the month's figures make the point that after seasonal adjustment the number of total mortgage commitments in January actually showed a 0.5% improvement on those for December 2022.

And yes, the December 2022 figures were pretty down there.

The January figures also, in relative terms, showed something of a bounce back for the first home buyers in terms of that grouping's share of the overall mortgage monies advanced during the month of January.

However, again, one should be cautious about any conclusions based on one month's figures and particularly when we are looking at such a low base. But for the record, the FHB's share of the mortgage money hit a new record high of 23.1%.

The investors, however, having had a slight uptick in December, saw their share drop to a new record low of 15.4%.

There were a lot of record lows recorded for January though - bearing in mind we are talking about relatively recent data that's been published by the RBNZ only since August 2014.

Here goes with some of the detail...

The $2.775 billion total mortgage money advanced in January was the second lowest since the data series began - beaten only by the $2.749 billion figure in April 2020 when we were all locked down.

Based on other criteria though the January 2023 figures are hands down numerically the lowest.

The 8680 number of mortgages issued in the month 'beat' the 9641 mortgages in April 2020 very comfortably (and yes, that's the next lowest figure).

Comparing January months, we can see that the latest number of mortgages for January 2023 compared with 12,033 in January 2022 and 19,186 in January 2021. Figures of around 18,000 to 19,000 mortgages have been about the 'norm' for a January - although in January 2016 there was 24,700 of them!

So, yeah, business is a bit quiet at the moment!

In terms of dollar amounts the $2.775 billion figure for January 2023 is down around 40% on the $4.68 billion in January 2022 and it's down a whopping $3.585 billion - that's 56.4% - on the $6.36 billion borrowed in January 2021 when the housing market was still operating on performance-enhancing drugs.

The housing market, as you may have noticed, of course is not faring as well now.

In its February Monetary Policy Statement released last week, the RBNZ revised again its forecast of how far house prices will fall.

In November it saw the total decline in prices being 20%, now it sees 23%.

"House prices have fallen by 15.2% since the peak in November 2021. House prices are projected to keep falling in 2023, consistent with very low sales volumes in recent months. House prices are assumed to have fallen by around 23% from their peak in 2021 to their trough in mid-2024, before recovering as interest rates decline toward their neutral setting," the RBNZ said.

There is, however, a bit of a silver lining in this for those who are out getting mortgages at the moment - albeit that they are now facing much higher interest rates.

The average size of the mortgages, which got quite jaw dropping for a while there, is falling quite fast.

In January 2023 the average-sized mortgage was (with some rounding) $320,000. That's down 17.8% on the figure in January 2022, which was $389,000. But that $389,000 average figure wasn't actually the peak high.

In fact the averages kept going up for a while last year even as house prices were starting to descend. It peaked at about $408,000 in May 2022, so the latest month's average figure is down 21.6% on the peak. You are paying more for the mortgage in terms of interest costs, but you at least don't have to borrow so much.

However, putting that in some perspective, if we go back to January 2021 the average mortgage size was $331,000 and in January 2020 it was 'just' $245,000. In very rough terms then we've come down to around late 2020-early-2021 levels in respect to mortgage sizes.

This shrinkage in mortgage size hasn't quite applied as much to the FHBs, however. The $549,000 average mortgage for the FHBs in January 2023 compares with $578,000 in January 2022, with $518,000 in January 2021 and $448,000 in January 2020.

To get back to the original question of have we now passed the trough in activity? Time will tell and one month's figures don't paint the picture.

But whether the 'trough' has been passed or not, the current figures suggest we aren't about to go scaling any new peaks particularly soon.

This story was originally published on Interest.co.nz and has been republished here with permission.