Return to mortgage top-ups
Kiwis are going back to topping up their mortgages to fund spending.
Mortgage brokers say boosted equity from rising house prices, plus low interest rates and better job security, have enticed homeowners into extra borrowing.
The trend is strongest in Canterbury as people fund their own home improvements on the back of earthquake-related repairs.
''There's a lot of it going on. People are upgrading on top of what's being done by EQC,'' according to Scott Miller, who owns Advanced Mortgage Solutions in Christchurch.
''You get interest rates as low as 4 per cent for some terms, capital gains on top of that, and voila. People feel like they've got more money to spend.''
Extra spending on home improvements was popular before the credit crunch five years ago, but has picked up again this year.
The Reserve Bank has tracked the rise in New Zealand household debt, which is mostly in mortgages.
From a peak of 153 per cent of annual income in 2009, the average debt fell to 141 per cent last year and has climbed back up to 146 per cent.
The bank has been keen to discourage borrowing and encourage saving to boost the country's financial stability.
Mike Collins, chief executive of New Zealand Home Loans, said renovations were mortgage holders' number one reason for drawing more funds, followed by car purchases and then rental property investment.
''Some borrowers will pay their debt faster if they can, but some see their house value and think it makes them $50,000 or $100,000 better off, so they go and spend it''.
Mortgage top-ups made up 10 per cent of what his customers were borrowing, rising from about 6 per cent after the credit crunch.
Typically banks provided same-day approvals for straightforward applications, Collins said.
For those with revolving mortgages it was even simpler, just a matter of putting the card in the machine.
Kiwibank communications manager Bruce Thompson said mortgage holders topping up was usually not a problem.
''If there's good equity, credit record and ability to repay it then yes, we're in.''
Thompson said while the bank's focus was first-home buyers, the new lending limits meant they were keen to expand other parts of their business.
Collins and Miller said this month's new bank rules, reducing new lending exceeding 80 per cent of a home's value, had slowed mortgage top-ups a little.
Neither were sure whether the slowdown would last.
The brokers said that while recent new borrowers could be affected by the rule change, most extending their loans had a bigger equity cushion.
- © Fairfax NZ News