First home buyers accounted for a record portion of banks' new mortgage lending in August.
A fifth (21 per cent) of the $5.4 billion of mortgage lending in the month went to first home buyers – the largest portion since Reserve Bank records began in 2014.
This slice of the pie was quite a bit bigger than the eight-year average of 15 per cent, and the two-year average of 18 per cent.
Nonetheless, the size of the pie shrank in August to 2019 levels. Total new mortgage lending was 34 per cent below that of August 2021, and 20 per cent below that of August 2020.
However, first home buyers didn't pull back from the market as much as other owner-occupiers. The amount of borrowing first home buyers did in August was 19 per cent below that of August 2021, and 16 per cent below that of August 2020.
Investors' share of new lending has been consistent at around 17 per cent since loan-to-value ratio (LVR) bank lending rules were reinstated in May 2021.
The housing market has been cooling, as the Reserve Bank has been lifting interest rates to curb inflation.
At 15,109, the total number of new mortgage commitments made by banks in August was the lowest on record for an August month.
Other factors putting downward pressure on house prices include rising housing supply and tougher tax rules for residential property investors.
Investors can no longer deduct interest as an expense when paying tax, and they now have to pay income tax on any profits made from the sale of a property within 10 years of purchase – rather than five years, as was previously the case.
Furthermore, borrowers face tougher Reserve Bank-imposed LVR restrictions than pre-pandemic. These restrictions, which were completely removed for a time during 2020 and 2021, require most owner-occupiers to have deposits of at least 20 per cent and most investors to have deposits of at least 40 per cent.
Banks have been turning away borrowers to ensure they don't breach these rules. A prospective borrower with a deposit of less than 20 per cent may struggle to get a look-in from a lender they don't already bank with.
When the RBNZ in November tightened LVR restrictions for owner-occupiers, halving (to 10 per cent) the portion of a bank's mortgage lending that can go to borrowers with deposits of less than 20 per cent, there were some fears first home buyers would be completely squeezed out of the market.
But, they've held their own – albeit in a sluggish environment.
Of all the mortgage debt taken out by first home buyers in August, 30 per cent went to those with small deposits of less than 20 per cent. This was just below the eight-year average of 33 per cent.
The average mortgage size for a first home buyer held up in August, at $568,538. Someone with a 30-year mortgage, paying interest of 5.5 per cent, would face repayments of $744 a week with a mortgage of this size.
The average mortgage size across all borrower types fell in August for the third month in a row to $358,263.