According to new data from the Reserve Bank of New Zealand (RBNZ), banks approved just 8,680 new mortgages in January, which was the lowest number in any month of the year on record and less than one-third the 2021 peak (i.e. 31,282 in March 2021):
The value of mortgages written has likewise collapsed. The below chart plots the value of new mortgages issued in rolling annual terms and shows that mortgage issuance plummeted 36% in the year to January:
Only $67.0 billion worth of new mortgages were originated in the year to January 2023, which is down from a peak of $101.4 billion in the year to August 2021.
The reason behind the collapse in mortgage demand is obvious: the RBNZ’s aggressive monetary tightening, which has lifted the official cash rate (OCR) from 0.25% in September 2021 to 4.75% currently:
These rate hikes have roughly doubled New Zealand’s mortgage rates (see below chart) alongside driven national house prices down by 16%.
The RBNZ’s latest Statement of Monetary Policy explicitly stated that it intends to hike the OCR further and drive the economy into recession in a bid to kill off inflation.
In doing so, the RBNZ forecast a sharp 2% increase in unemployment alongside a 23% peak-to-trough decline in house prices.
Given that dark prognosis from the country’s central bank, there is little wonder New Zealand mortgage holders have run for the hills.
