Investors make a come back as growth in outstanding mortgages slows

by Phil McCarroll02 Sep 2016
Annual growth in the value of outstanding mortgages hit a two year low over the June quarter, according to an analysis of Australian Prudential Regulation Authority (APRA) data.

The analysis of APRA’s property exposures data, carried out by CoreLogic, shows that as of the end of the June quarter there was $1.437bn worth of outstanding mortgages in Australia, which represents an 8.1% increase over the previous 12 months.

That rate of growth is the slowest annual increase since the June 2014 quarter.

Of the total value of outstanding mortgages, owner occupiers are responsible for $930.4bn while investors account for $506.3bn.

Over the previous 12 months, the value of outstanding owner occupier mortgages has increased by 14.8%, representing its largest rise since March 2010.

In comparison, the value of investor mortgages outstanding has fallen by 2.4% year-on-year, which is the greatest decline on record.

Over the June quarter itself, $98.4bn in new mortgages were written, $64.4bn of which was for owner occupiers and $34bn for investors.

Over the quarter the value of lending to owner occupiers rose by 15.2% while investor lending jumped 32.5% to its highest level since June 2015.

Year-on-year owner occupier lending is 16.2% higher while investor lending is 16.9% lower.

Over the June quarter, $35.6bn worth of interest only loans, which represents a 19.1% year-on-year fall; however it is 25.1% rise compared to the March 2016 quarter.

CoreLogic research head Cameron Kusher said the quarterly increase in investment lending and interest only loans likely indicates investors are returning to the market.

“Overall the data shows that there has been a rebound in new lending to investors and a commensurate increase in interest-only lending over the past quarter.  After annual investor housing credit growth has slumped to well below APRA’s 10% pa speed limit it is clear that some lenders have scope to dial-up their lending to investors,” Kusher said.

“It also shows that despite historically weak rental markets and record low rental yields that there remains demand from the investment segment of the market.”

Kusher said the rebound in investor activity is something to be mindful of, as it increases the possibility of further APRA intervention. However, he said the fact that high LVR lending is slowing is a positive.

“While investment lending has lifted over the past quarter, the data is showing there is a more conservative approach to high LVR lending. The ongoing decline in lending with an LVR above 90% is encouraging because it should lead to reduced risk,” Kusher said.

According to APRA’s figures, a record high 78% of new mortgages over the June quarter had an LVR of less than 80%.