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A prominent research analyst believes Australian mortgage providers have room to begin ramping up their appetite for investor loans.
The new statistics by the RBA revealed that investor housing credit growth has fallen to 7.9 per cent over the past year, which is its slowest annual pace of growth since February 2014.
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CoreLogic RP Data research analyst Cameron Kusher said the new data takes the annual change in investment lending well below the 10 per cent cap imposed by APRA and will perhaps mean a pick-up in demand is on the horizon.
“Late in 2014, the Australian Prudential Regulation Authority (APRA) provided guidelines to lenders that annual housing credit should not expand by more than 10 per cent per annum. These changes were largely implemented from the middle of last year,” Mr Kusher said.
“Given this, it would seem there is some scope for lenders to ease their policies on investment lending and lift the level of lending for investment purposes, given credit growth is now well below 10 per cent per annum.”
Mr Kusher pointed to the latest housing finance data to December 2015, which revealed a slight pick-up in new investment lending following a large fall over the second half of last year.
“Given the tentative signs of a pick-up in investor demand in the housing finance data, investor housing credit growth now well below 10 per cent per annum and home values still rising, why wouldn’t investor demand ramp back up?” he said.
However, Mr Kusher said there are some indicators as to why investor demand may not rebound.
“This group is now facing not only higher mortgage rates due to the out-of-cycle lift in mortgage rates by lenders last year but they are also experiencing an average of 30 basis points higher mortgage rates because they are an investor,” he said.
“The home value growth phase in Sydney and Melbourne is now very mature, having run for almost four years, [therefore] perhaps there is some concern as to how much longer it can run.
“Elsewhere, value growth is and has been moderate, with values falling in Perth and Darwin. With potential concerns of a slowing of value growth, rental yields are virtually at historic lows with rental rates unchanged over the year, acting as a potential disincentive.”
Mr Kusher said it’s also unclear how investors will react to proposed negative gearing changes if implemented.
“We anticipate that from here there may be a bit of a pick-up in investment borrowing largely because mortgage rates remain low and housing returns are much stronger than other asset classes,” he added.
“Although a pick-up in investment activity is a possibility, it is unlikely that the annual rate of housing credit growth will return to or breach its 10 per cent per annum limit.”
[Related: Owner occupier demand plunges]
