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Investors abandoning mortgage market

Investors abandoning mortgage market

Investors may be permanently dropping out of the residential lending market, according to an analysis of new data from the Australian Bureau of Statistics.

Investor housing commitments have dropped by 2.6 per cent in December, and 10.5 per cent year-on-year, a RateCity analysis of the latest housing finance data from the Australian Bureau of Statistics (ABS) has uncovered. 

The drop out from investors totals $1.4 billion, with investment lending falling from $13.2 billion in December 2016 to $11.8 billion in December 2017, and according to RateCity, the figures are an indication of a sustained decrease in investment activity.

RateCity money editor Sally Tindall believes that a “crackdown” on investment lending by the Australian Prudential Regulation Authority (APRA) is beginning to bear fruit.

“APRA has been trying to curb investor lending for four years now. They’re finally getting long-term results,” Ms Tindall said.

“The first time APRA cracked down on investor lending, we saw an immediate drop in investor figures, but the numbers started climbing back up within six months.

“This time around, APRA seems to be hitting the mark.”

Ms Tindall also believes that first home buyers (FHBs) have been making inroads into the market, following APRA’s 10 per cent cap on investment lending in 2014 and 30 per cent cap imposed on banks for interest-only (IO) loans in 2017.

“First home buyers have been making traction over the last year, taking advantage of the retreat from investors.

“[The] figures, while marginally down from the previous month, show a year-on-year increase in market share from 13.8 per cent to 17.9 per cent.

“It’s good to see these buyers securing a bigger slice of our property market.”

Average home loan size at record high

Meanwhile, a finder.com.au analysis of ABS data has also revealed that the average home loan size has increased to $393,200 in December 2017, up by $4,300 in December 2016.

FHB loans have also ballooned to a record high of $334,700, while the non-FHB loan size grew to $406,000. 

“$248 billion in new owner-occupier home loans were written in 2017 — a record amount,” finder.com.au money expert Bessie Hassan said.

“We’re seeing home loans reach record sizes, quite possibly due to the RBA keeping the cash rate at record lows for over a year and a half. Record low rates are making it an attractive environment for Aussies to borrow more than ever before.

“With economic conditions improving overseas, it could become a similar story in Australia and 2018 could be the year we see rates rise again.”

Home loan sizes in New South Wales are the largest in the country ($460,100), while home loan sizes in South Australia experienced the largest percentage increase, rising by 8.28 per cent in December 2017.

[Related: Mortgage curbs earn banks $500m annuity from taxpayers]

Investors abandoning mortgage market
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