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The number of borrowers going interest only increases, as 24% of housing and 41% of business loans were interest only at the end of April

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Borrowers shifted several billions of dollars of mortgage and business loans to interest only in April, as the country went into lockdown due to COVID-19.

As at the end of April, 24% of the $277 billion of housing loans borrowers had with banks were interest only. This was up from 21% in March and 19% in February, according to the Reserve Bank (RBNZ).

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The portion of interest only business loans increased to 41% in April, from 38% in March and 36% in February.

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The figures show borrowers largely rearranged their debt rather than borrow a lot more.

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The value of business loans on banks’ books only increased by 0.15%, or $182 million, to $118 billion in April.

Meanwhile the value of housing loans fell by 0.2% - the largest monthly decline seen since the RBNZ started collecting this data in 1998. The lockdown meant the housing market essentially froze in April.

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The value of deposits held by banks increased again in April - up nearly $5.6 billion, or 1.5%, to $385 billion.

It’s worth noting the Government injecting about $11 billion into the economy via its wage subsidy, which affected these figures.

Of this $385 billion of deposits, $193 billion were made by households. The value of their deposits increased by 1.9% from the previous month.

The increase in household deposits was all in transaction and savings accounts, with term deposits down.

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