Data from the Reserve Bank of New Zealand shows that banks approved just 11,468 new mortgages in February.
That was lowest February approvals number on record and the third lowest monthly figure ever:
The value of mortgages underwritten has also plummeted.
The next chart plots the value of new mortgages originated in annual terms and shows that mortgage issuance crashed 36% in the year to February:
The amount of new mortgages originated fell from a peak of $101.4 billion in the year to August 2021 to only $65.1 billion in the year to February 2023.
The Reserve Bank’s strong monetary tightening, which has increased the official cash rate from 0.25% in September 2021 to 5.25% currently, is the clear cause of the decline in mortgage demand.
Mortgage rates in New Zealand have more than doubled as a result of the Reserve Bank’s tightening, and national home values have plunged by 16% as a result.
The latest survey of real estate agents by Tony Alexander shows that buyer demand has collapsed amid concerns around “rising interest rates”, “difficulties getting finance” and “worries that prices will fall” after purchasing:
Until the Reserve Bank reverses course on interest rates, home buyers, mortgage demand and prices will likely continue to retreat.
