Owner-occupier loan growth slowed under the weight of growing mortgage costs but investor lending is continuing its record surge.
Bank loans to Australian investors grew by $42bn in the year to March, a 9.6% increase and the fastest rate since September 2015, according to the central bank’s statistics.
Alannah Comer and her partner were among thousands of Australians who haven taken out investment loans. The Sydney-based couple bought on the city’s northern outskirts in December.
“Obviously, we understand that rates and everything are going to change, but I always just was like: ‘As soon as we’re in a position to buy it, I definitely want to just head straight in’.”
The Reserve Bank has hiked interest rates twice already this year since they bought their investment property and economist predict the central bank will raise rates again on Tuesday, but the couple do not regret their decision. Their property has already risen in value.
Rumoured reforms to capital gains tax in next week’s budget could eat into her profits, but Comer is not deterred, even planning for another purchase in coming years.
“[We’ll] obviously be cautious, keep an eye out on what is happening in the world and see how we’re coping [and] … if it is worthwhile, obviously getting another property,” Comer said.
“It’s still kept the momentum and people still need to buy and sell.”
Loans to owner-occupiers rose only 6.2% in the year to March, slowing since December as interest rates pushed buyers out of the market. Auction clearance rates have dropped to below 60% and price growth has slowed.
Loan Market, a mortgage broking company saw first home buyers’ applications drop by a third after a brief bump after March’s rate rise. Investor applications, meanwhile, are higher than they were at the start of the year.
Beau Cook, a Loan Market broker in Richmond, Sydney, said he would typically have about one investor for every four owner-occupiers applying through his branch.
He now has four investors, for one first home buyer.
“It’s completely turned on its head in the last three months,” Cook said.
ANZ and NAB have each reported investors accounted for more than two-fifths of their new home loans in the six months to March, continuing a steady rise.
The banks have also given early signs interest rate rises could put property out of lower-income earners’ reach.
NAB on Monday reported people earning less than $200,000 a year accounted for about 10% of applications for investor loans in the six months to March, down from close to 15% the year prior.
A rising share of investors with ANZ and NAB have taken out interest-only loans, which have smaller short-term repayments but leave the borrower saddled with bigger long-term debt.
Madeline Dunk, an ANZ economist says a rate hike is likely on Tuesday and that markets expect another by year’s end, meaning investors will become more constrained
“I do expect you’ll see investor housing credit slow,” she said.
“We’ve seen that drop-off in activity in the housing market [and] a lot of that will be driven by slowing in investor activity.”
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