The household debt party is continuing to gather pace, with rates of growth last seen before the Global Financial Crisis

By David Hargreaves

The country is continuing to party like it’s 2008, with household debt growing at rates last seen just before the Global Financial Crisis.

The RBNZ’s monthly sector credit figures show that housing borrowing hit an annual growth rate of 8.8% in June, while total household claims (also including consumer finance) had an annual increase of 8.3%.

Both these rates of annual growth are the fastest recorded since May 2008.

On a seasonally-adjusted basis the household claims rose 0.8% in June. The last time we saw a faster rate of growth than that was in late 2007.

The continued growth and stretching of household balance sheets – with debt to disposable income ratios at record highs – will be concerning the Reserve Bank. At the moment debt servicing is comfortable for households because of the low interest rates. But when interest rates do start to rise again the position could change pretty quickly.

Total household claims hit $236.775 billion in June, up from $234.963 billion in May.

Housing debt alone lifted to $221.42 billion in June from $219.563 billion in May.

The housing debt has mushroomed by nearly $18 billion in the past year. That’s an average growth rate of about $1.5 billion a month – though it’s actually been running considerably stronger than that in recent months.

The RBNZ’s Key Household Financial Statistics series latest figures for the March quarter released last month showed that household debt had now risen to a record high 163% of disposable income. The latest borrowing figures would certainly suggest that this record percentage figure is continuing to climb.

And new monthly data now being released by the RBNZ show that around 40% of new mortgage borrowing is on an interest-only basis, with about 55% of money being borrowed by investors on interest-only.