Rise in investor lending

Despite the Australian banks tightening of their lending restrictions, activity in investor lending in Australia is still on the rise.

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Despite the Australian banks tightening of their lending restrictions, activity in investor lending in Australia is still on the rise.

Figures for January show that investor lending increased by 4.2 per cent, marking a dramatic 27.5 per cent increase over the past 12 months, with interest in the Sydney and Melbourne markets still running hot.

This is the most marked growth since the Australian Prudential Regulation Authority (APRA) put a cap on investor credit growth of 10 per cent per annum back in 2015.

Although the average size of loans has only risen slightly, despite stronger house-price growth, should this trend continue, further measures from the Reserve Bank of Australia (RBA) and APRA to cool investor activity seems highly likely.

Indeed, the language coming out of the RBA is all pointing to tougher macro-prudential measures being introduced over the coming months.

In a recent speech to government, RBA governor Philip Lowe underlined the need for greater regulation, should investor lending continue to grow.

In recent months nearly half of all banks and lenders have raised their loan rates for investors, with the average price now 29 basis points above the average price for owner-occupiers. 

As this is not denting investor confidence, greater measures to slow property investment seem certain, and could include higher capital requirements or slashing the banks’ investor lending growth to 7 per cent year-on-year.

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