Mortgage debt is rising at the fastest clip for 4 years.

Figures compiled by the Reserve Bank show housing loans at the end of April, at $181.4 billion, up 4.9 per cent on April last year, the fastest annual increase since November 2008.

And it is accelerating. Six months ago the annual increase was 2.8 per cent and a year ago 1.5 per cent.

The figures also show a continued shift from floating to fixed-term loans. Just 51 per cent of household mortgage debt is on floating rates, down from 63 per cent a year ago.


This means that when the Reserve Bank does start to raise interest rates it will take longer to gain traction in the mortgage belt. Economists expect it to begin the tightening cycle not by raising the official cash rate but by wielding one or more of its new macroprudential tools.

They are measures primarily designed to increase the resilience of the banking system to future shocks, like a steep drop in house prices, but they should also have some effect in cooling rapid growth in credit and in asset prices, like house prices.

Some increase the amount of capital banks need to hold for a given amount of lending, making it more expensive for banks to extend loans. One move in that direction will take effect in September. But they also include the ability to instruct the banks to ration the amount of low-deposit lending they do.

Governor Graeme Wheeler said on Thursday that across the five major banks 30 per cent of new mortgage lending was to clients with deposits of less than 20 per cent of the value of the property, up from around 23 per cent in October 2011.

The bank was concerned the acceleration of household debt was from a starting point where debt levels are already high, relative to incomes, at around 145 per cent. That is almost half as much again as at the outset of the last outbreak of house price inflation 10 years ago.

The increase in New Zealand house prices over the 2003 to 2007 period was the most rapid in the developed world, Wheeler said, and unlike some Northern Hemisphere countries has not been followed by a bust.