The latest Mortgage Index results from aggregator service, AFG paint "a very different picture from this time last year”, said AFG CEO, David Bailey.
“Regulator-led tightening of investor lending has led to a further drop in investor volume and they are now sitting at an all-time low of 29 per cent of the market.”
The Australian Prudential Regulation Authority in March introduced measures designed to crack down on investor lending in response to an "environment of heightened risks". The regulator directed lenders to keep new interest-only lending to below 30 per cent of all new residential lending. Lending to investors was also to remain below a 10 per cent growth speed limit.
"The national average home loan is now sitting at an all time high of $491,000,” said Mr Bailey.
“This increase can be explained by the fact that people generally spend more for their primary place of residence than they do for an investment property."
At 29 per cent, the proportion of investor lending in the first quarter of the 2018 financial year is 3 per cent lower than the proportion in the same quarter last year.
Going back further to the first quarter of FY15 shows a drop of 10 per cent, from 39 per cent. Correspondingly, the proportion of upgrader loans has grown from 31 per cent in the first quarter of FY15 to 41 per cent.
The percentage of those looking for refinance also dropped to 25 per cent from 29 per cent in the last quarter of FY17.
"This is also likely to be a reflection of the lack of lending options on the table for investors wanting to refinance, as lenders pull back from the investor market to meet regulator demands,” Mr Bailey explained.
He continued: "Looking at loan type, fixed rates are now at 26.3 per cent of all loans which confirms many Australians are anticipating that the next interest rate move will be up.”
Mr Bailey also noted the fact that first home buyers are "enjoying" their third quarter in a row of filling out a double digit proportion, rising from 10 per cent of the market in both the third and fourth quarters of FY17 to 13 per cent in the most recent.
"National market share for first home buyers has lifted to 13 per cent across the last quarter, helped in part by new stamp duty concessions kicking in on 1 July for this segment of the market in Victoria and NSW.”
The results coincide with Sydney house prices falling for the first time in nearly three years. According to Domain's latest State of the Market Report, Sydney's housing market has experienced its first decline since December 2015.
“Generally, weaker capital city house price growth over the September quarter is reflected in the national results,” said Domain’s chief economist, Dr Andrew Wilson.
“House price growth is expected to continue to ease in most capital cities over the remainder of the year, although the underlying drivers remain positive.”