The Reserve Bank of New Zealand has released the results of an ‘out of cycle’ survey of credit conditions it conducted in June to see what impact the Covid-19 crisis is having on credit supply and demand.
The Kiwi banks reported a general decline in demand for credit, but an increase in demand for working capital loans from SMEs and corporates.
Banks said they were closely scrutinising new lending to sectors exposed to Covid-19 shock (such as tourism, retail, accommodation and construction) and also indicated “further tightening of lending standards is likely”.
Commercial property loans also contracted more than banks' willingness to lend and banks expect these conditions will continue through to the end of this year, the RBNZ said.
The New Zealand coronavirus lockdown saw a predictable fall in demand for mortgage lending but banks say they expect a fall in demand in the second half of the year as well. They are bracing for more distressed sales once government financial assistance ends and, while willing to lend, say they will be performing more ‘due diligence’ on those applying for mortgages.
The RBNZ's index of credit demand for mortgages in the first six months of 2020 contracted by 24 points while the availability of mortgages shrank 8.7 points.
Demand for loans from dairy farmers shrank sharply, but banks expect demand to pick up in the next six months.