1. CCCFA rules ease on Thursday
The reversal of December’s changes to the CCCFA rules kicks in on Thursday, equating to an easing in credit conditions for some borrowers, as banks can now ignore things like KiwiSaver deposits as an “expense”, and can also assume that people will curb some spending after they get a loan (rather than having to be squeaky clean in advance). No doubt this will enable some extra people to secure a mortgage who might otherwise have been turned down. But the general feeling is that it won’t be a game-changer on its own, especially given other restrictions in the credit environment.
2. A brief respite for low-deposit borrowers
To be fair, some of those restrictions haven’t been quite so tight lately. Witness the rise in the share of owner occupier lending being done at a low deposit (or high loan to value ratio/LVR) from 3% in March to 6.1% in April and 7.7% in May. Some first home buyers have certainly benefitted from this. However, from a bank’s perspective, that may now be getting uncomfortably close to the mandated 10% speed limit, and indeed a few major lenders (e.g. ANZ and ASB) have already announced a temporary pause on high LVR loans. As such, it wouldn’t be a surprise to see this figure drop back from 7.7% in the next few months, or in other words, the small window of freedom for low deposit borrowers is about to shut again.
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3. But at least employment is still rising
There is obviously plenty of pessimism around housing at present, but one key support remains - the labour market. Last week, Stats NZ data showed that filled jobs rose by 0.3% in May, following on from April’s 0.5% rise (seasonally adjusted). Filled jobs did wobble a bit over December to March, but that now seems to have been an Omicron-related issue rather than something more fundamental. Rising employment won’t stop this housing correction in its tracks, but it will tend to limit the eventual price falls.
CoreLogic chief economist Kelvin Davidson: “The small window of freedom for low deposit borrowers is about to shut again.” Photo / Peter Meecham
4. Confident? Not at all
Last week’s business confidence survey from ANZ was more of the same: weak sentiment from firms about their trading prospects, but also continued concern about costs and selling price pressures. On the whole, there’s nothing to prevent the Reserve Bank from raising the Official Cash Rate on July 13 (probably by 0.5 percentage points again), but the survey also highlights those lingering recession/unemployment risks. That was simply reinforced by the consumer confidence survey too, also released last week, and also showing low sentiment but elevated concerns about inflation.
5. Consents still defying gravity
After a bit of weakness in April’s figures – which could have marked the start of a turning point – new dwelling consents defied gravity (rising costs, materials shortages, higher mortgage rates, low consumer sentiment) yet again and in May were 8% higher than a year ago. This pushed the annual running total above 51,000 for the first time. All in all, they’re still strong for now, but that turning point is still coming soon ….
https://www.stats.govt.nz/news/may-consents-remain-at-record-levels/
- Kelvin Davidson is chief economist at property insights firm CoreLogic
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