Mortgage growth favouring prime lending

by Madison Utley23 Sep 2019

While July saw the strongest growth in new mortgages in five years, APRA data has revealed that only a small percentage of the new lending occurred in the non-prime space. 

“Overall, the data from APRA shows that riskier lending – those loans with a high LVR, interest-only or non-standard mortgages – remain a low proportion of new mortgages being written,” said CoreLogic analyst Cameron Kusher.

Year on year for the quarter ending June 30, low documentation loan approvals were down -52.8%, loans approved outside of serviceability were down -36.6% and other non-standard loans were down -42.2%.

Low doc lending accounted for just 0.1% of the value of loans approved over the quarter, while loans approved outside of serviceability were at their lowest share since December 2017 at 4%. 

The total value of interest-only mortgages has fallen to the lowest value since September 2012 at $359.0bn. They account for just 21.6% of current outstanding mortgages, the lowest share in over a decade. 

While the figures were still muted, loans with high LVRs fared the best of the “riskier lending” categories.

Over the quarter, there was $17.9bn in mortgages written with an LVR greater than 80%, which accounted for 22.4% of all commitments over the quarter. This was the highest since December 2015, however, it remains well below the March 2009 peak of 37.6%.

Despite the lacklustre trends revealed in the data, Kusher noted, “With macroprudential policies eased further during recent months, it wouldn’t be a surprise to see a moderate increase in demand for non-standard and higher LVR mortgages over the coming quarters.”