Investment loans beginning to drop

by Julia Corderoy10 Aug 2015
Demand for owner-occupied home loans climbed higher in June, but demand for investment loans has dropped, new figures reveal.

Housing finance figures released by the Australian Bureau of Statistics (ABS) revealed that the number of owner occupied home loans grew by 4.4% over the month.

According to Mortgage Choice chief executive John Flavell, the slight improvement in home loan demand was not totally unexpected. 

“Research conducted by CoreLogic found property values continued to climb higher across Australia’s combined capital cities in June, suggesting property demand remains strong,” he said. 

“Across the combined capital cities, dwelling values were up 2.1% over the month of June – taking total growth for the 12 months to July to 9.8%.

“Rising property values is indicative of strong demand for dwellings. Property values in Sydney and Melbourne continue to rise month after month, suggesting demand for dwellings in these capital cities is robust.”

However, the demand for investment loans fell over the month. Just over $13 billion in investment loans were written over the month of June, down 0.7% on the month prior, according to the ABS. 

This result isn’t surprising given the widespread crackdown on investment lending, which has seen many lenders increase rates and tighten credit policies on investment loans.

“A lot of lenders are making a lot of changes at the moment, and this will no doubt serve to keep some potential investors on the sidelines,” Flavell said.  

But as Flavell has argued in the past, he does not believe the crackdown on investment lending is healthy for the market.
“Unfortunately, the people these changes are affecting are the mum and dad investors and first time buyers who are choosing to purchase investment properties before owner occupied properties.”

Moving forward, Flavell said he wouldn’t be surprised to see a further drop off in investment lending activity as the changes that Australia’s lenders are making to their policy and pricing continue to filter through to market.