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Nearly a third of mortgages lodged by AFG brokers in Q4 were for investor loans, marking a seven-year high, according to new data.
ASX-listed aggregator Australian Finance Group (AFG) has revealed that the proportion of investor loans being written by its brokers crept up to its highest level since the financial year 2017.
According to the group’s latest Mortgage Index, which covers AFG broker activity for 4Q24 (ended 30 June), 32 per cent of all mortgages lodged by broker members in the last three months of the financial year were for investor loans.
This represents the highest flow of investor loan activity since 3Q17 (when it was 32 per cent) and is 3 percentage points higher than the same period last year (29 per cent).
The value of AFG’s total investor loan lodgements increased by $1 billion (or 16 per cent) on 4Q23.
In tandem with a seven-year high for investor loans at AFG, the aggregator also reported a seven-year high for interest-only (IO) loan demand.
IO loans made up 21 per cent of mortgages written by AFG brokers in 4Q24, a 3 percentage point increase on 4Q23 and the largest proportion seen since the 4Q17 (when it was 33 per cent).
The last time IO lending had accelerated, the prudential regulator stepped in to introduce speed limits to moderate investor and interest-only lending, which it deemed “higher risk”.
Commenting on the trends, AFG CEO David Bailey said: “Interest-only loans are up from 19 per cent to 21 per cent, reflecting the increase in investor activity for the quarter.
“Over the past two years we have seen investor loans steadily creep up to now sit at 32 per cent – up from 27 per cent two years ago but still below the longer-term average of around 35 per cent.
“Investors look for capital growth opportunities, and in an environment where housing is in short supply it is naturally an appealing proposition.”
The AFG CEO said that, however, not all states were seeing continued investor lending demand.
Victoria’s share of investor loans dipped below the long-term average during 4Q24, for example.
Bailey said: “It will be interesting to see if the Victorian State Government property tax changes continue to impact the attractiveness of property investment in the Education State.”
The AFG results echoed a similar trend identified in the latest Lending Indicators data from the Australian Bureau of Statistics (ABS), which also revealed a healthy appetite for investment lending finance.
The ABS data (released earlier this week) showed that the value of new loan commitments for investor housing was 29.5 per cent higher than in May 2023 ($10.7 billion) and followed on from investor loan volumes hitting a two-year high in April 2024 (when it reached $10.9 billion).
According to the ABS, the average size of an investor loan in May 2024 was $625,739, 4.5 per cent higher than in May 2023 ($598,405).
In May, the value of new loans to investors in Queensland reached a record high of $2.4 billion (mainly due to investors taking out larger loans in the Sunshine State), exceeding Victoria for the third consecutive month.
The average loan size for investors in Queensland increased by 14.3 per cent over the year to May (from $508,000 to $580,000) while the average loan size in Victoria fell 3.2 per cent over the same period, from $584,000 to $566,000.
Several brokers recently said that borrowing capacity constraints were a leading driver in increased investor lending.
The AFG data also revealed that its broker members were particularly busy in 4Q24. As reported by The Adviser on Thursday, total lodgement volumes at the aggregator reached record highs, with AFG brokers lodging $23.3 billion in mortgage finance in the quarter.
“Broker activity over the quarter was high and lodgement numbers hit more than 36,395 in the final three months of the 2024 financial year,” Bailey said.
“This lift was led by compelling contributions from Western Australia and New South Wales which saw a jump in volumes of 22.02 per cent and 18.7 per cent respectively. Other states also contributed strongly with increases in Queensland (up 12.2 per cent), South Australia (10.7 per cent), and Victoria (10.4 per cent ).”
[Related: Brokers reveal why investor lending is the new growth market]
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