The value of home loan approvals hit a record this month, suggesting Kiwi borrowers could be failing to heed the Reserve Bank's warnings around rising levels of household debt.

Lending worth $1.56 billion was approved in the seven days to December 11, the most in one week since the central bank's records began in 2003.

Meanwhile, the number of loans approved, at 7181, didn't top the highs seen in previous years, which points to borrowers taking out larger loans.

For example, close to 11,000 loans were approved in the week to April 3, 2009, but they were valued at only $1.3 billion.

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The average value of loans approved in the week to December 11 was $216,682.

Massey University banking expert David Tripe said just because approvals had been granted didn't mean all of the lending had taken place.

"But it does suggest there is likely to be a bit of an upsurge in lending coming through," Tripe said. "It does look like there might be something interesting when we see the [actual lending] figures for January and February ... that'll be the real test of the numbers." In its November Financial Stability Report, the Reserve Bank noted that household debt levels remained "elevated" and the combination of low mortgage rates, high household debt and a rising housing market posed a major risk to the financial system.

It said housing debt increased at an annualised rate of 8 per cent in the three months to September.

New mortgage commitments were increasing sharply, running at about 36 per cent of outstanding mortgage debt.

"Notably, a significant proportion of mortgage lending is being undertaken at elevated debt-to-income ratios," the report said. "Although low mortgage rates are currently relieving pressure on these indebted households, some borrowers could quickly come under pressure if their labour incomes decline or mortgage rates increase." New Zealand's total mortgage debt topped $200 billion for the first time at the start of this year, up from just over $100 billion in 2005.

Tripe said bank-to-bank refinancing, as borrowers switched lenders to take advantage of lower rates, could be contributing to the high number of approvals seen this month.
John Bolton, chief executive of Squirrel Mortgages, agreed.

"The reality is that with interest rates as low as they are, there's a lot of refinancing activity at the moment," Bolton said. "That refinancing activity is also captured in those [Reserve Bank] statistics." He said the rise in December approvals was not something to be concerned about.

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"The number of house sales in Auckland are actually falling at the moment," Bolton said. "It's dangerous to look at this statistic in isolation of everything else."

Week to December 11

Total approvals:

$1.6 billion

Loans approved:

7181