The banks are increasingly taking their foot off the brake on home lending, particularly for ‘riskier’ loans, according to APRA’s recently released quarterly banking figures.
The banking regulator’s data shows new residential home loans to borrowers with a high debt-to-income ratio increased by 22.3 per cent between the September and December 2019 quarters.
Low deposit loans – those with an LVR of 95 per cent or higher – jumped 17.5 per cent from the previous quarter while interest-only loans increased by 7.9 per cent over the same time period, after coming off a low base.
New residential home loans, all ADIs – APRA
| September 2019 | December 2019 | Change | ||
| Owner-occupied | $64.0 billion | $71.9 billion | 12.40% | |
| Investment | $28.6 billion | $32.0 billion | 12.00% | |
| Interest-only | $17.4 billion | $18.7 billion | 7.90% | |
| Low-deposit (95%+ LVRs) | $1.4 billion | $1.6 billion | 17.50% | |
| Debt-to-income of 6x or higher | $14.0 billion | $17.1 billion | 22.30% | |
Source: APRA quarterly authorised deposit-taking institution statistics for December 2019, released 10 March, 2020.
Sally Tindall, research director at RateCity.com.au, said the banks were continuing to open their doors to borrowers after years of belt tightening.
“APRA’s caps on investor and interest-only loans, and the fallout from the Royal Commission, led to a significant crackdown in home lending,” she said.
“Since APRA lifted its caps and revised some of its serviceability guidelines, banks have been able to attract more business through their door.
“We’ve also seen this in the last few rounds of rate cuts, where many banks reserved the biggest cuts for investors on interest-only loans.
“Over the last few years, some banks overshot APRA’s benchmarks. But they’ve now made it clear they are re-open for business, not just for owner occupiers, but for a wider segment of the market.”
Just as a reminder…
Here is a timeline of some of APRA’s actions:
- 9 Dec 2014 – APRA asks ADI’s to limit growth in investor lending to under 10 per cent.
- 31 March 2017 – APRA asks ADI’s to limit interest only lending to 30 per cent of new loans written.
- 26 April 2018 – APRA announces the investor cap will not apply from 1 July 2018 for banks keeping within the limits.
- 19 December 2018 – APRA announces that the interest-only cap will cease from 1 January 2019.
- 5 July 2019 – APRA allows banks to set their own serviceability floor rate, provided a buffer of 2.5 per cent is applied to current interest rates for the purposes of serviceability.
Here’s what you can do about this…
If you’re looking at buying your next home or investment property here’s 4 ways we can help you:
Yes the lending environment is getting easier and sure many of the property markets around Australia are performing well, but correct property selection is even more important than ever, as only selected sectors of the market are likely to outperform.
Michael Yardney
