Housing affordability Housing finance fell overall 1.6% in April, figures show, with a 2.3% reduction in borrowing by investors
Mortgage lending appears to be slowing in the wake of the financial regulator’s latest clampdown on interest-only loans.
The value of all housing‑related lending fell by 1.6% in April, data from the Australian Bureau of Statistics showed on Friday, in the first full month after the Australian Prudential Regulation Authority (Apra) introduced tighter macro-prudential policies.
The data shows investor lending fell 2.3% in April, which is down 7.7% since the recent peak in investor lending in January.
The value of loans to owner-occupiers was also down in April, by 1.1%.
However, when excluding refinancing and first-home buyers, the value of loans to owner-occupiers actually increased in April, by 4.1%.
Economists say it is too early to draw firm conclusions from the data, but it may suggest Apra’s crackdown on interest-only lending is putting immediate pressure on investors.
The ABS data comes three months after Waynes Byres, Apra’s chairman, warned Australia’s major banks to tighten their lending practices on investor and interest-only loans.
At the time, CoreLogic data was showing Sydney property prices had soared by almost 20% in 12 months, putting the city at the front of a nationwide trend that had dwelling values increasing by 12.9% on average.
Byres warned the banks they needed to be mindful of the “heightened risk in the lending environment” and asked them to “appropriately respond to these conditions” by changing their lending standards and practices.
He asked them to limit their growth in lending to investors, with the growth rate to remain “comfortably” below the previously advised benchmark of 10%.
Ratings agency Moody’s was also warning that more borrowers were falling behind on their mortgage and car repayments.
It said delinquencies for prime residential mortgage-backed securities increased to 1.61% in January, from 1.57% in December, while 30-day delinquencies for car loan asset-backed securities rose to 1.80%, from 1.54% over the same period.
Economists say the ABS data on investor lending in April show that as investor-lending eases there has been a slight pick-up in lending to owner-occupiers.
However, the share of loans to first home buyers remains low by historical standards at 13.9%.
“Today’s numbers capture the early impact of APRA’s latest rule changes, which limit new interest‑only lending,” Commonwealth Bank economist Kristina Clifton said on Friday. “These rule changes are likely to affect not only investors, but owner‑occupiers as well.”
JP Morgan economist Henry St John said owner-occupier refinancing fell sharply in April – by 4.4% – potentially signalling a slow-down in the flow of borrowers switching from principal and interest to interest-only mortgages, as banks tighten their lending criteria.
Clifton said it would take several months before the full impact of Apra’s clamp down, and new policies from state and federal governments, kicked in.
“There has been several new initiatives announced recently to help first home buyers get into the market,” she said. “The first ones to take effect are the stamp duty reductions announced by the NSW and Victorian state governments beginning on 1 July. These states have the lowest shares of first-home buyers.
“There were also measures announced in the May federal budget to help first home buyers save for a deposit. However these will take at least two years to have any impact.”