The drop-off in investor mortgage enquiries is improving, indicating the 'spitting of the dummy period' could be over, independent economist Tony Alexander says.
In a July Tony Alexander monthly mortgage advisers survey released on Tuesday, a net 19 percent of advisers reported seeing fewer investors. But the result, while still negative, was less so than results over March to June, making it the "least weak outcome" in five months.
Tony Alexander said overall, there's still an "easing back" of buyers from the market. Results show a stronger drop-off in investor enquiry, compared to first-home buyer enquiry.
But following reinstatement of loan-to-value ratio (LVR) restrictions and the Government housing announcement, a net 19 percent of mortgage advisers saying they're seeing fewer investors is the best result since February.
"Investors are pulling back from the initial 'spitting the dummy period' after the March 23 tax changes," Alexander said.
July results indicate investors may be forming "more realistic assessments" of where their best interests lie, turning their attention to recent mortgage rate increases and expectations of future rate rises.
"They're pulling back from their greatest period of discontent and things are settling down," Alexander added.
A net 10 percent of mortgage advisers reported seeing fewer first-home buyers in July, similar to a net 9 percent in June. Over the last few months, first-home buyer enquiries have "plateaued", although since March, first-home buyer enquiries have been well below 2020 levels.
"This still means young people are holding back from the market, but not in greater numbers...this then is a point of contrast with investors," the report said.
Popularity of the three-year fixed rate rose in July, with a net 54 percent of mortgage advisers reporting this as the preferred term for borrowers.
In recent months, borrowers had moved away from one-year fixed rates to two-year rates. In July, just 5 percent of mortgage advisers rated the one-year fixed rate as the most preferred.
"History tells us that when we do get rising interest rates, [fixing for] 3 years does become more popular, " Alexander said.
Amid forecasts of an Official Cash Rate rise in August, the report also showed a jump in enquiries about refinancing, such as refixing mortgage rates and enquiring about break fees.
The Tony Alexander mortgage advisers survey is run in conjunction with mortgages.co.nz. The July survey collated 59 responses from mortgage advisers across the country and is an early indication of market activity.
The full July mortgage advisers report is available here.
