Home loan approvals jump as market lifts
Official figures released on Tuesday said lenders' exposure to residential property loans held by households was worth $1.13 trillion, an amount that has increased by 7.3 per cent in the year to June.
New lending, however, is expanding much more quickly than the banking sector's total exposure to property, because borrowers are using low interest rates to pay off their debts more quickly, taking older loans off banks' books.
The Australian Prudential Regulation Authority said lenders had approved $79 billion in new loans during the June quarter, which was 28 per cent more than they had approved in the previous March quarter and 20 per cent more than a year earlier.
The fastest growing category of property lending was to investors, with the value of investment loan approvals surging by 35 per cent to $27.8 billion in the quarter.
Loan approvals for owner-occupiers also grew strongly, jumping 25 per cent to $51.2 billion.
Auction clearance rates in Sydney hover near record highs, re-igniting the debate about the risk of a bubble in Australian property led by speculative investors.
JP Morgan economist Tom Kennedy said lending was likely to keep flowing into property investment as the housing market recovered.
"We've got rising house prices and falling interest rates - both of those things are quite attractive for investors. They can get better returns and they can service the debt more cheaply," he said.
Low returns from bank deposits - which can be lower than inflation, once tax is taken into account - are also tipped to drive more investors into the housing market.
Figures suggest banks remain conservative on credit standards.
The share of new housing approvals that are "low doc" loans has fallen to 0.7 per cent in the quarter, compared with 1.1 per cent a year earlier.
The percentage of new mortgages worth more than 90 per cent of the property value has also fallen slightly in the past year, from 14.4 to 13.4 per cent.
The APRA figures also showed banks' exposure to commercial property has increased by 2.5 per cent in the past year to $213 billion.
Frequently Asked Questions about this Article…
New home loan approvals rose 28% to $79 billion in the June quarter, according to APRA. The article links the jump to a housing market recovery, with more lending flowing as borrowers take advantage of lower interest rates to refinance or pay down older loans.
Lenders' exposure to residential property loans held by households was $1.13 trillion, up 7.3% in the year to June. The article notes new lending is expanding faster than total exposure because borrowers are using low rates to repay older loans, removing them from banks’ books.
Investment loan approvals surged 35% to $27.8 billion in the quarter, the fastest-growing category of property lending. The article highlights that rising house prices and falling interest rates make property investment more attractive, which is why more investors are entering the market.
Loan approvals for owner-occupiers grew 25% to $51.2 billion in the quarter, showing strong recovery in borrowing by people buying homes to live in as the housing market picks up.
No — APRA’s figures suggest banks remain conservative on credit. The share of new approvals that are low-doc loans fell to 0.7% from 1.1% a year earlier, and the percentage of mortgages above 90% of property value decreased slightly from 14.4% to 13.4%.
The article says auction clearance rates in Sydney are hovering near record highs and have re‑ignited debate about bubble risk, particularly from speculative investors. It reports JP Morgan economist Tom Kennedy expects lending to keep flowing into property while prices rise and rates stay low, but the article does not make a definitive judgement on a bubble.
According to the article, falling interest rates make it cheaper for investors to service debt, and low returns from bank deposits (which can be below inflation after tax) are pushing more investors toward the housing market in search of better returns.
APRA’s figures showed banks’ exposure to commercial property increased by 2.5% in the past year to $213 billion, indicating growth in commercial property lending alongside the rise in residential lending.
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