Recent months have seen Australia’s banking regulator APRA finally get serious about doing what it can to cool the property markets in Sydney and Melbourne.
There have been a lot of headlines about the policy changes at the banks designed to dampen demand for investor lending, with the major banks increasing their interest rates on investor loans.
But it looks like they’re tapping down the amounts they’ll lend to people looking to by a home for living in, too. Deutsche Bank analysts Andrew Triggs and Anthony Hoo, in a recent note to clients, say that the mortgage borrowing limits appear to be falling across the board.
They share this fantastic chart which shows the ceiling on what major banks will lend to a person on $100,000 looking to buy their own home. You can see there have been cuts across the board as the banks work to reduce the risk on their loan books:
Many of the banks appear to have increased their limits following the RBA interest rate cut in May. But the APRA screws really started tightening in July, and the August data shows dramatic reductions at all of the lenders.
Westpac, which has the highest exposure of the major banks to the residential property market, has slashed its loan limit from $600,000 to $493,000.
APRA chairman Wayne Byers indicated to the Senate hearings on housing affordability earlier this month that:
Our objective has been to ensure that in the broader environment of high house prices, high household debt, historically low interest rates and subdued income growth – along with strong competitive pressures within the financial system – sound lending standards are maintained across the board. Thus far, we have not imposed formal regulatory requirements in relation to lending practices: put simply, we have requested banks to take a prudent view of borrower income, ensure they are not underestimating a borrower’s living expenses, and allow for the fact that interest rates will not always be as low as they are today. None of this should be seen as anything other than common sense.
We noted in July that there were major changes underway in Australian banks. This is evidence that the change is biting, and dramatically.
The banks' clampdown on lending to property investors appears to be having an impact, with new figures showing growth in the value of housing investor loans slowed further in August.
Reserve Bank numbers on Wednesday show housing investor credit growth is still running strong, but the growth rate has cooled off from peaks earlier this year. This has occurred after banks tightened lending policies and raised interest rates for investors.
Housing investor credit grew by 10.7 per cent in the year to August, which is faster than the Australian Prudential Regulation Authority's (APRA) cap of 10 per cent a year.
However, it is slower than the growth rate of 11.1 per cent recorded in the year to June, and comes after a wide range of actions by banks to slow their growth in the investor market.
The RBA said the figures were affected by a "large number" of customers having their loans reclassified from investor mortgages to owner-occupied loans.
All housing credit rose to 7.5 per cent in the year, from 7.4 per cent in the previous month, as owner-occupied credit growth picked up.
APRA released its quarterly property exposure figures today for the period ended 30 September 2016.
If there has been a slowdown in lending, sheesh, it's hard to make out from the chart.
Total domestic residential property exposures increased by +7.9 percent from a year ago to a new high of $1.46 trillion.
Exposures are now some +130 percent higher than they were in 2008.
The growth in exposure to investors has been stopped in its tracks, however, with new loans to investors down 14 per cent from a year ago.
However, owner-occupier loans stepped in to breach the gap, with exposures rising by +12.9 percent over the year to September, and the value of new loans to homebuyers rising by some +14 percent.
In short, lenders have switched focus from investors to homebuyers.
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