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Banks back away from risky business

Banks back away from risky business

Banks continue to turn their backs on riskier home loans, as the value of new interest-only and low doc loans hit record lows, according to APRA data released today.

APRA’s Quarterly ADI Property Exposures for the March 2019 quarter shows the value of new loans to owner-occupiers fell by 17.6 per cent from the previous quarter, while the value of new loans to investors fell by 18.7 per cent in the same time frame.

The value of new interest-only loans fell by 22.5 per cent between December and March to 14.9 per cent of all loans, the lowest percentage share in APRA’s records dating back to 2008.

Meanwhile the value of new ‘low doc’ loans fell 48.4 per cent in the recent quarter to represent 0.1 per cent of all loans – again, the lowest percentage share in APRA’s records.

RateCity.com.au research director Sally Tindall said banks were continuing to be hyper-vigilant in the wake of the Royal Commission, despite the easing of regulations.

“APRA might have loosened the strings on interest-only and investor lending but the banks are still ultra-cautious when it comes to high risk loans,” she said.

“APRA had wanted less than 30 per cent of new loans written to be interest-only. The banks have well and truly smashed this out of the park.

“Not only do interest-only loans represent just 14.9 per cent of all new loans written, they also represent just 23.3 per cent of the banks’ entire loan books, according to the most recent data,” she said.

APRA’s Quarterly ADI Property Exposures: March 2019

New lending, all authorised deposit-taking intuitions (ADIs)

Type of loanValue of new loans written ($M)Share of all loansChange from previous quarter
Owner-occupier51,094.570.6%-17.6%
Investor21,300.929.4%-18.7%
Interest-only10,785.414.9% (record low)-22.5%
Low doc88.40.1% (record low)-48.4%

Source: APRA, based on ADIs with loan books of more than $1B as determined by APRA.

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This article was reviewed by Property & Personal Finance Writer Nick Bendel before it was published as part of RateCity's Fact Check process.

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