The value of loans to property investors continues to fall, underlining the effectiveness of the macro-prudential regulations introduced to cool the housing market.
The Australian Prudential Regulation Authority (APRA) capped interest-only mortgage lending in the final week of March, telling banks to restrict higher-risk interest-only loans to 30% of new residential mortgages.
This set off a fresh round of out-of-cycle rate hikes by the major lenders, with banks repricing their loan books to make interest-only investor loans more expensive, in order to comply with the new regulatory curbs.
Home loan approval numbers rebounded in May, rising by 1%, after declining for three consecutive months. However, the gains fell short of market expectations of a 1.5% rise.
Matthew Hassan, senior economist at Westpac, said some of the rise in owner-occupier loans is likely the result of investors switching from investor to owner-occupier loans. “A lift in refinancing suggests we may be starting to see existing borrowers move from interest-only to standard loans,” he said.
The total value of housing finance rose 1.3% to $33bn in May, according to seasonally adjusted data from the Australian Bureau of Statistics (ABS). This increase was driven by housing finance to owner-occupiers, which rose by 2.9% from April, while investor lending dropped 1.4% from April to May, hitting a nine-month low.
According to Jo Masters, senior economist at ANZ, the latest ABS data confirmed a growing divergence in lending to owner-occupiers and investors.
“Not surprisingly, investor housing finance continues to moderate, reflecting the combination of additional macro prudential measures, out-of-cycle rate hikes aimed at investors and various government measures,” she said. “Owner-occupier finance, on the other hand, looks solid and has recorded four consecutive monthly increases.”
Economists widely expect the combination of macro-prudential controls, interest rate rises, and government measures to continue to slow lending to investors during the second half of 2017.
Related stories:
The RBA Cash Rate Is On Hold – Now What?
HSBC: There Is No Bubble In Sydney And Melbourne
