• 23/06/2024

Home loan slide an early sign that APRA limits may be working

ABC News – 10 July, 2015

By Michael Janda


The latest official figures reveal the biggest monthly fall in home lending since 2009 in an early sign that measures to tighten loan standards might be working.

The Bureau of Statistics housing finance data for May show a 4.4 per cent fall in the total value of new loans issued, which UBS said is a 4.6 per cent slide when refinancing is excluded.

That puts the year-on-year growth just below 9 per cent, a large slowdown from a very strong 14.1 per cent previously.

UBS said this makes the trend for home loan approvals flat so far this year, versus 12 per cent growth in 2014 and a 28 per cent boom over 2013.

As home loan approvals tend to lead purchases, UBS said these figures are an early sign that price growth in the nation’s booming markets may also soon start to ease.

The data raises the prospect that the Australian Prudential Regulation Authority’s (APRA) attempts to cap investor lending growth to less than 10 per cent, and improve general home loan standards, may be working.

“The sharp fall in finance approvals in May reflects both the clear softening in buyer sentiment across owner-occupier segments since mid-2014 and the ‘macroprudential’ measures aimed at containing investor lending,” noted Westpac senior economist Matthew Hassan.

APRA appeared to have ramped up its pressure on banks in May after initial action in December seemed to be largely ignored by most banks.

However, despite the banking regulator’s particular focus on investment lending, it was the number of new loans to owner-occupiers that suffered the greatest decline in May, falling 6.1 per cent, or 8.2 per cent excluding refinancing.

Meanwhile, the value of investment lending fell a more moderate 3.2 per cent in the month, and is still up 19.4 per cent over the past year.

The proportion of first home buyers in the market remained historically low at just 15.9 per cent of all owner-occupier buyers.

UBS said, when investors are factored into the market, the first home owner share of loans remains around an 11-year low of 9.2 per cent.


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