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Home lending on slide as market cools
The Australian 12:00am June 10, 2017
James Glynn
Lending for Australian housing fell for a third straight month in April, in the latest sign that a push by the banking regulator earlier this year to cool the property market is beginning to work.
The number of home-loan approvals fell a seasonally adjusted 1.9 per cent in April from March, the Bureau of Statistics said.
Economists surveyed ahead of the announcement had expected a 1 per cent decline over the month.
The value of loans for investment housing fell 2.3 per cent from March, the ABS said.
The mortgage market is under close scrutiny amid concerns that record household debt could eventually slow economic growth and destabilise banks.
“(The) numbers capture the early impact of APRA’s latest rule changes, which limit new interest-only lending,” CBA economist Kristina Clifton said.
“However, it is likely to take a number of months before the full impact of these changes can be assessed.”
The Australian Prudential Regulation Authority capped interest-only mortgage lending on March 31, telling lenders to limit higher risk interest-only loans to 30 per cent of new residential mortgages.
That set off a fresh round of rate increases by the major lenders, with banks repricing their loan book to make interest-only and investor loans more expensive.
The decline in April was driven by a 2.3 per cent fall in the value of loans for investment housing, while the value of loans approved for owner-occupied housing fell 1.1 per cent.
JPMorgan economist Henry St John said it was still too early to assess the efficacy of macroprudential policy, but noted that lenders had continued to tighten rates in recent weeks.
“Moreover, there is evidence the Sydney and Melbourne property markets are cooling, which supports the view that these revamped macro-prudential measures are having the desired effect,” he said in a note.
In late March, the banking watchdog ordered banks to toughen lending practices to investors in residential property, as it worried about risks including rising household indebtedness.
APRA told banks to limit the flow of interest-only lending to 30 per cent of new residential mortgage loans.
Banks must also keep lending to investors well below a benchmark of 10 per cent growth, APRA said at the time.
Reserve Bank governor Philip Lowe has indicated that the central bank remains reluctant to lower interest rates further to avoid stoking the overheated market.
First-quarter GDP data on Wednesday showed the economy growing at its slowest pace since 2009, with economists saying a slowdown in consumer spending is putting a brake on the economy. A combination of record household debt, record low wages growth, soaring house prices, and a soft job market is expected to continue restraining consumer demand.
