Reduced appetite for credit and falling house prices will hit New Zealand mortgage market, says GlobalData

A reluctance to take on credit and buy houses, especially for first-time buyers, will negatively impact the New Zealand mortgage market in the short-term, according to GlobalData, a leading data and analytics company.

Resham Karira, Retail Banking Analyst at GlobalData, says: “Banks are offering mortgage relief on payments for up to six months for customers affected by coronavirus (COVID-19). This will support outstanding balances in the short-term, but its impact is expected to be limited.”

GlobalData’s revised post-COVID-19 forecasts expect mortgage loans to still grow in 2020, but at a reduced rate of 4.2% (compared to 6.7% previously).

Karira adds: “Government funding and support for lenders from the Royal Bank of New Zealand will help, but it will still struggle to record anything above minimal growth in 2020. However, we forecast credit card outstanding balances to fall by 1.5% in 2020, compared to 3.2% growth in our original forecasts.

“The epidemic is proving to be a testing time for the country’s credit card market, with reduced consumer spending impacting the ability and desire of consumers to purchase goods on credit. We expect growth to recover after 2020, when the initial shock has worn off, but not to the previously forecasted levels.”

GlobalData’s report,COVID-19 Sector Impact: Retail Banking – New Zealand’, forecasts retail deposits to benefit as a result of the risk aversion. According to the report, retail deposits are forecast to benefit from a flight to safety in 2020, as was seen during the financial crisis.

Karira concludes: “Given the less severe impact on financial markets so far, on this occasion, inflows are anticipated to be less strong than in other markets. By the end of 2020, we forecast retail deposit holdings to grow by 7.1%, compared with the previous forecast of 5.9%.”

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