Billions of dollars in mortgages still being switched

Following the introduction of an interest rate differential between housing loans to investors and owner-occupiers in mid-2015, a number of borrowers have changed the purpose of their existing loan.

The latest financial aggregates from the RBA, released last week, show the net value of switching of loan purpose from investor to owner-occupier is estimated to have been $41 billion from July 2015 to May 2016, of which $1.1 billion occurred in May.

A quick look at the central bank’s stats for home lending reveals how the mortgage market has been reshaped by regulatory forces.

Over the 12 months to May this year, owner-occupied home loans grew by 12 .9 per cent, a marked difference from the almost stagnant 0.9 per cent growth over the year to May 2015.

Investor loan growth contracted by 1.5 per cent over the year to May, a stark contrast to the 16.2 per cent growth over the 12 months to May 2015.

The JP Morgan Australian Mortgage Industry report, released earlier this year, revealed that up to 10 per cent of investors are now unable to obtain the finance they need to continue acquiring property.

The report noted that the proportion of investors who are intending to transact in the next 12 months is declining, largely due to their inability to obtain finance.

Report co-author Martin North said investors are still active in the marketplace, but they are doing “somewhat different things than perhaps what they were doing previously”.

“Investors are still active, but there is now this little question about whether they can get the funding they want. There is now around 9 or 10 per cent of investors who cannot get the financing that they want,” Mr North said.

“This is a reflection of the different lending criteria that [is] actually now being very much imposed on the market and that’s obviously regulatory intervention on a number of dimensions.”

Australia’s largest lender, CBA, has seen its share of broker-originated investor loans fall significantly from a high of 25.6 per cent in February to 19.4 per cent in May, according to the latest AFG Competition Index.

With the inclusion of Bankwest mortgages, CBA’s share of investor loans fell from 31.0 per cent to 24.9 per cent over the period.

Meanwhile, Westpac group – including Bank of Melbourne, Bank SA and St George Bank – grew its share of investor loans from 19.5 per cent to 21.2 per cent, while NAB Broker has seen its share increase from 7.9 per cent in February to 12.6 per cent in May.

ANZ’s share of investor loans fell from 14.9 per cent in February to 12.5 per cent in May.

However, the majors are still recording almost three-quarters of AFG broker-originated investor loans at 73.0 per cent in May.

[Related: 'Tens of thousands' switching out of investor loans]