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Investor housing credit growth hits record low

House in a cart going down

Housing credit data released by the Reserve Bank of Australia has revealed annual investor credit growth is at a historic low of 1.4 per cent.

According to CoreLogic’s Property Pulse report, in the 12 months to September 2018 housing credit grew by just 5.2 per cent, signalling the slowest increase since November 2013.

Focusing in on the month of September, investor credit expanded by just 0.1 per cent, indicating a slowing of commitments.

Monthly housing finance data matches these figures, showing demand for new mortgages has slowed with lending trending lower.

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The slowing in credit expansion is partially attributed to a fall in new interest-only lending, according to quarterly data from APRA, with more borrowers switching from interest-only to principal and interest mortgages before expiry.

These trends are reflected with interest-only mortgages making up only 28.8 per cent of total credit by June 2018, a significant fall from highs of 39.5 per cent.

While investors are overwhelmingly driving the slowdown of credit expansion at 33.1 per cent of the total credit share, this is actually the smallest credit share attributed to investors since June 2012. It is also significantly less than the peak of 38.7 per cent in June 2015.  

The report suggested the combination of decreased demand for investor mortgages and owner-occupier mortgages and the trend of borrowers switching from interest-only to paying down their principal may see slow growth in housing credit continue in the future.

“Add to this the fact that lenders are reducing their exposure to high levels of borrower debt relative to incomes and increasing their focus on borrower serviceability, and the outlook for housing credit could contract further from here,” the report concluded.

Investor housing credit growth hits record low
House in a cart going down
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