Investor lending takes a hit

Adam Smith 14 May 2018 NEWS

house-coin-stack-down The slowdown comes as housing finance falls to its lowest level in nearly two years.

New figures from the Australian Bureau of Statistics show housing finance commitments fell in March to their lowest level since August 2016. Analysis of the data by CoreLogic has revealed investment lending was particularly hard hit.

"While the value of lending fell over the month for owner-occupiers and investors, the slowdown was much more substantial for investors, and the sharp month-on-month fall follows a downward trend that has been evident across several rounds of macro-prudential measures over the past few years," CoreLogic said in a press release.

While owner-occupier housing finance fell 1.9% in March, investor lending was down much more sharply, with a 9% decline. The value of investment lending was at its lowest level since January 2016.

"The declining trend in investor housing finance commitments had slowed recently; however, the 9% monthly fall was the largest decline since September 2015 when they fell 10.4% over the month as lenders tightened in order to remain under the 10% APRA speed limit in annualised terms," CoreLogic said.

While APRA has lifted its cap on investment lending, CoreLogic said this move could fail to entice investors.

"There have been recent reports that lenders are starting to reduce the interest rate premiums on some interest-only loans and investment loans; however, any reduction in rates could be offset by stricter serviceability testing on borrower expenses and incomes as well as the prospect for renewed focus from lenders to reduce their exposure to high loan-to-income ratio loans as well as maintaining their reluctance to take on high loan-to-valuation ratio loans," CoreLogic said.

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