Banks pull back on mortgage lending
Data from the Australian Bureau of Statistics shows the size of home loans are falling across the country, with the national average home loan size now $357,200. This equates to a slide of 4.08 per cent in February 2016 compared to the previous month.
The national home loan size has declined by 7.71 per cent in total in the past three months to February 2016, or $29,100 – the biggest three-month drop since May-July 2000, when the national average declined 7.74 per cent.
Bessie Hassan, money expert at finder.com.au, says the impact of tougher bank lending policies introduced during mid-2015 is finally being felt.
“A cooling property market has led to shrinking maximum loan sizes following the Australian Prudential Regulatory Authority’s changes to investment lending,” she says.
“Banks are scrutinising new loan applications more closely, taking a tougher line when assessing a borrower’s income.”
Latest figures from CoreLogic show the rate of house price growth is slowing year-on-year – March data reveals that median capital city prices rose just 0.2 per cent.
Data from credit reporting bureau Veda also shows the demand for mortgages slowed significantly in the last quarter of 2015, with growth in mortgage applications decreasing by 2.9 per cent compared to December quarter 2014. This is the second quarterly decline in a row.
Hassan believes the effect of this will put the home loan market under pressure, and banks will be eager to secure new customers.
“This could lead to an increase in housing affordability with interest rates declining even further,” she says.
Jessica Darnbrough of Mortgage Choice Limited says potential borrowers should speak to a professional to get the best information for their situation.
“Be it their local banker or a broker. A finance professional can let them know exactly what their borrowing capacity is and help them find the right product for their needs,” she says.
“In addition, potential borrowers should make a list of things they want and need from their mortgage.
“If they want interest rate security for example, they may choose to take on a fixed rate home loan.
“Alternatively, if they’re looking home loan flexibility, they may decide to go with a variable rate mortgage with an offset account attached.
“Knowing what you want from your mortgage will make it easier to find the right product.”
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