Supporting information:

Series description: Housing loan approvals – Experimental series

Definition of an approval

An approval is defined as a firm commitment to provide credit for the purchase of housing, which has been accepted by the borrower. A commitment exists once the home loan application is approved, and a loan contract or letter of offer has been issued to the borrower.

The weekly housing loan approvals series is used primarily as an indicator of change in the stock of housing credit. The net change in the stock of credit is a combination of new lending (of which approvals are an indicator) and repayments.

Below is a summary of series inclusions and exclusions.

Exclusions

Own customer refinance
The ‘rolling over’ of a fixed rate loan, and its subsequent refinancing, is excluded.
Business borrowing where the security is the owner’s home
Business borrowing of this type tends to use specialist products or specific lending channels, and is not included.
The underlying value of a loan being “topped up”
When a loan is topped up with extra borrowing, only the topped up portion is included.

Inclusions

Refinance of other banks customers
If a loan is refinanced using a different bank, it is included as a new approval. A key future enhancement to the approvals series will be working with responding banks to remove these loans in particular.
Any loan where the security changes
If a borrower sells the property the loan is secured against and purchases another, a new loan is documented, and included as a new approval.
Any loan where the liability holder changes
If an existing mortgage held by an individual is incorporated into a family trust or other special purpose vehicle, new loan documentation needs to be drawn up and is therefore included as a new approval.

Number of approvals

The number of housing loan approvals processed in the week up to, and including, the reference date. The reported figure is an aggregation of the individual institution responses.

Value of approvals

The value (in $m) of housing loan approvals processed in the week up to, and including, the reference date. The reported figure is an aggregation of the individual institution responses.

Year-on-year percentage change

13-week year-on-year percentage change

This aggregates the most recent 13 weeks of data (ie; three months of housing loan approvals) and compares it to the aggregate of the same thirteen weeks in the previous year, to represent an annual percentage change. This method assumes 52 weeks to the calendar year.

52-week year-on-year percentage change

This aggregates the most recent 52 weeks of data (ie; one year of housing loan approvals) and compares it to the immediately preceding 52 weeks, to represent an annual percentage change.

Alternative measures to represent annual percentage change

With other RBNZ data releases, an annual percentage change is calculated using the current period, and the same period in the previous year. For weekly data like the experimental housing approvals series, calculating an annual percentage change in this way produces distorted results. Individual week outturns can be heavily impacted by public holidays (particularly those that move year to year e.g. Easter) and other business processing variation, which makes the subsequent percentage change difficult to interpret.

Two alternative methods for producing an annual percentage change in housing loan approvals are provided in table C16, for both the number and value of housing loan approvals. The 52-week percentage change provides a smoother, more ‘trend-like’ result, while the 13-week percentage change is able to identify turning points in the series in a timelier manner.

Survey sample

Seven Registered banks respond to the survey. These banks represent over 99 percent of registered bank lending for housing, and approximately 94 percent of total housing lending as produced in table C6.

The housing loan approvals time series begins with data for the week ended 31 October 2003. Not all responding banks are able to provide data beginning at the same period. The following table shows the approximate level of imputation in the series.

Period	Approximate level of imputation
October 2003 - March 2007	25 percent
April 2007 – July 2007	21 percent
August 2007 – February 2008	4 percent
March 2008 onwards	0 percent

Housing loan approvals data from responding banks, and alternative data sources from the non-responding banks, have been used in the imputation process.

Further development

The weekly housing loan approvals series is intended for publication as an experimental series, as it does not meet the quality standards of other official RBNZ data. It is intended to develop the series further.

Last updated March 2009