High LVR lending falls to ‘record low’

The Australian Prudential Regulation Authority’s (APRA) Quarterly ADI Property Exposures statistics have revealed that the number of mortgages issued with a loan-to-value ratio (LVR) over 90 per cent dropped by 13.7 per cent in the year ending September 2018, from $6.6 billion to $5.7 billion.

Reflecting on the "record-low" drop in low-deposit lending, RateCity.com.au research director Sally Tindall observed: “Banks are increasingly demanding a 20 per cent deposit from people applying for new loans.

“While house prices are dropping nationally, this is a big stumbling block for anyone who miscalculated how much they need for a deposit.

“Just 6 per cent of new loans written this quarter had a deposit of 10 per cent or less.”

The APRA data also revealed that banks’ appetite for low-doc lending also slumped, falling by 43 per cent year-on-year, from $341 million in new loans issued in the 12 months to September 2017 to $196 million.

The number of “other non-standard loans” approved also declined, falling from $115 million to $98 million over the same period.

Further, the effect of APRA’S macro-prudential cap on interest-only lending is also evidenced by the latest statistics, with the number of new loans issued with interest-only terms declining by 13.3 per cent, from $16.6 billion to $14.4 billion.

Additionally, the number of new loans issued through the third-party channel also dropped, slipping from $48.9 billion in the year to September 2017 to $44.6 billion.

The total value of new owner-occupied loans issued over the year fell by $3 billion, from $65.3 billion to $62.3 billion, while investor lending fell from $30.6 billion to $26.8 billion.

On the whole, the total value of new home loans issued by banks in the ending September 2018 declined by $7.1 billion, from $96.3 billion to $89.2 billion.  

[Related: Bump in loan approvals a ‘blip’ amid downturn]