The Australian Prudential Regulation Authority’s (APRA) quarterly authorised deposit-taking institution (ADI) property exposures statistics for September 2020 showed that residential mortgage lending growth is being supported by owner-occupiers while other categories of lending are declining.
New residential mortgage lending totalled $11.3 billion in the September 2020 quarter, which is an increase of 18.8 per cent over the corresponding period in the previous year.
New lending also increased on a quarter-on-quarter basis, although at a slower rate than in the June 2020 quarter, with owner-occupied and investment lending increasing by 1.7 per cent and 0.6 per cent, respectively.
“The slower growth rate is consistent with a 6.6 per cent moderation in new external refinances over the quarter, which still remain higher than levels earlier in the year,” APRA said.
The share of interest-only owner-occupied lending increased over the September quarter by 1.6 percentage points to 7.4 per cent.
According to APRA’s quarterly ADI statistics, new loans for owner-occupied residential mortgages rose by 22.2 per cent over the year, from $64.0 billion in the September 2019 quarter to $78.2 billion in the September 2020 quarter.
Investment loans also recorded an increase, rising by 13.3 per cent from $28.6 billion in the September 2019 quarter to $32.4 billion in the September 2020 quarter.
Interest-only loans jumped by 21.0 per cent from $17.4 billion in the September 2019 quarter to $21.0 billion in the September 2020 quarter.
New loans with a loan-to-value ratio (LVR) of 95 per cent and over rose by 35.0 per cent from $1.4 billion in the September 2019 quarter to $1.9 billion in the September 2020 quarter.
Third-party-originated new loans grew by 30.1 per cent over the 12 months, from $48.3 billion in the September 2019 quarter to $62.8 billion in the September 2020 quarter.
New loans with a debt-to-income ratio of six or greater rose by 29.0 per cent from $14.0 billion in the September 2019 quarter to $18.0 billion in the September 2020 quarter.
Overall, although the ADI sector remains profitable, returns have declined significantly, with year-end net profit after tax declining by 38.8 per cent from $34.4 billion in the September 2019 quarter to $21.0 billion in the September 2020 quarter.
The industry non-performing loan ratio (impaired and past due items to gross loans and advances) increased to 1.1 per cent as at 30 September 2020, from 0.9 per cent the previous year.
The NPL ratio improved marginally over the September quarter “as loans which may have otherwise been past due have been granted repayment deferrals and some borrowers have improved their financial situation with the aid of income support measures”.
“However, asset quality is expected to deteriorate somewhat over the medium term, as repayment deferrals expire and government stimulus tapers off,” APRA said.
[Related: Bank profits sink despite home lending surge]
Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.