According to an analysis from ANZ economists Daniel Gradwell and Shaurya Mishra, recent data from the Australian Bureau of Statistics (ABS), the Australian Prudential Regulation Authority (APRA) and the Reserve Bank of Australia (RBA) has highlighted the “divergence” between banks and non-banks.
The economists noted that while credit supplied by banks is slowing as a result of tighter serviceability requirements and macro-prudential measures imposed off the back of regulatory scrutiny, non-bank lending is on the rise.
The ANZ analysis reported that while housing credit across the banks increased by 4.8 per cent year-on-year, non-bank housing credit rose by 13 per cent.
The ANZ economists added that because of the accelerated growth, the market share of non-bank housing debt rose steadily, from a recent trough of 6.6 per cent at the end of 2016 to 7.7 per cent as of August 2018.
“It appears that non-bank lenders are making the most of their position outside of APRA’s regulatory net. This is not to say that non-bank lenders are playing their own game,” the economists said.
The analysis also found that most of the increase in credit supplied by non-banks has flowed to owner-occupier borrowers (17 per cent year-on-year), compared to investors (2.5 per cent year-on-year).
The economists said that the rise in non-bank market share would help “take some of the edge off” the downturn in credit availability.
“A stronger lending appetite across the non-bank sector is welcome news for the housing market,” the economists continued.
“The banks likely have some further tightening in their lending criteria, reflecting the impact of comprehensive credit reporting (CCR) and debt-to-income limits, but better credit availability from the non-banks will take some of the edge off this ongoing development.”
However, the economists claimed that despite the rise in non-bank lending, their share of the market would likely to “remain relatively small”.
“It is worth keeping in mind, though, that the strong growth in the non-bank space is coming from a low base,” the economists added.
“The market share of non-bank lending is likely to remain relatively small, and thus will not be able to entirely offset further credit tightening by the banks.
“We continue to expect that credit availability will weigh on housing prices and construction, both of which are expected to decline for some time yet.”