The total of residential term loans to households held by all ADIs climbed 1.9% in the March quarter, according to APRA quarterly statistics, reaching a record $1.3 trillion. The total residential mortgage market increased 9% over the 12 months to March 2015.
Investor loans were behind the majority of growth, increasing by 2.6% from the December 2014 quarter. Over the year to March 2015, loans to investors surged 12.4% - well above APRA’s prudential guidelines.
In a letter sent to all ADIs about reinforcing sound residential mortgage lending practices earlier this year, APRA chairman Wayne Byres said any material growth in investor loans over 10% will “likely result in a supervisory response”.
“Given the currently very strong growth in investor lending, supervisors will be particularly alert to plans for rapid growth in this part of the portfolio. For example, annual investor credit growth materially above a benchmark of 10% will be an important risk indicator that supervisors will take into account when reviewing ADIs’ residential mortgage risk profile and considering supervisory actions,” he said.
However, lenders have made considerable steps over the past week towards reducing their exposure to the investor market. All four major banks reduced discounts offered to new investor borrowers. Other lenders, such as Heritage Bank and Bankwest, have even applied LVR caps on investor loans.
According to the APRA statistics, the major banks now hold 81% of the total residential mortgage market and 83% of the investor market.
However, the major banks increased their total market share by just 1.7% over the March quarter and 8.6% over the year to March. Meanwhile, other domestic banks increased their total market share by 4.2% over the quarter and 18.6% over the year.
