The latest Reserve Bank figures show mortgage lending by registered banks grew by $354 million in July, down from $652 in June while household deposits grew by $958 million, up 9.3% on July last year.
However, floating rate mortgages shrank by $2.07 billion in July compared with June, accounting for 58.7% of total bank lending on mortgages, down from 60% in June and from the peak at 63.1% in April. The percentage of floating rate mortgages is now at its lowest level since October last year.
Most of the growth was in fixed-term loans of two years or less which grew by $1.57 billion in the quarter. Those fixed for more than two but less than three years grew by $0.55 billion.
“It's a continuation of trends and consistent with some pick up in the economy,” BNZ economist Doug Steel says.
The switch into fixed-rate mortgages reflects lower fixed interest rates than floating rates, he says. The average interest rate on new loans in July was 5.6%, slightly higher than 5.56% in June but down from 5.8% in July last year.
Steel says the Real Estate Institute's house price index rose 4.5% in the year ended July. “If you believe that's a good enough indicator of where house prices will be in 12 months time, real mortgage interest rates are getting quite low at 1.1%,” he says.
