Market Update April 2017

Having dropped to an historic low of 1.75 per cent in November 2016, the Official Cash Rate continues to remain unchanged. With inflation still low, Reserve Bank governor Graeme Wheeler has stated he is in no rush to move this, although heightened geopolitical risks could lead to a change sooner than planned.

Overall, New Zealand’s property market is still experiencing growth, even though house price inflation has moderated, in part due to tighter restrictions on loan-to-value ratio lending. Long-term mortgage rates are set to rise with the lift in global interest rates and the increase in term deposit competition amongst lenders. However, aside from the 0.08%pt rise in the average floating rate, local mortgage rates remain the same as they were a month ago for most terms.

In other news, the Reserve Bank announced earlier this month that they would now publish new monthly statistics to provide greater transparency into the banking sector, including information covering the breakdown of loans, securities, deposits and borrowing. There has been an increased demand from both the public and the media for increased access to this information since the global financial crisis.

“Users will be able to see the banks’ mortgage lending portfolio broken down by payment type, such as interest-only, revolving credit and principal and interest,” says Reserve Bank Statistics Manager Steffi Schuster. “Residential investor mortgage lending will also now be separately identified.”

Business sector statistics have also been extended to include further data on agriculture, commercial property and other business lending activity. The Reserve Bank plans to publish even more data later in the year, providing further detail on bank deposits, as well as information regarding lending to the business sector and commercial property sector. Key statistics such as credit have been backdated to December 2016 to provide comparable historical data.