The number of new mortgages to owner-occupiers tumbled a seasonally adjusted 6.1 per cent in May, the biggest fall in 5 years according to Australian Bureau of Statistics (ABS) data released on Friday.
The value of loans written to investors fell 3.2 per cent, while owner occupiers slumped 5.3 percent. Regulators had been targeting the overheated investor segment, forcing banks to tighten lending to limit further damage from Australia’s housing bubble.
Economists were surprised to see such a large fall, the same month the Reserve Bank slashed the official cash rate from 2.25 per cent to just 2 per cent, a new record low. Many were also surprised to see a larger fall in the owner occupier segment, a segment not being targeted by macroprudential regulation. Following the Reserve Bank announcement in May, Treasurer Joe Hockey pleaded, “I say to the Australian people directly, now is the time to borrow and invest, whether you be a household or business.” It’s possible many Australians saw through the Treasurer’s plea, fearing a deteriorating economy and have decided to suspend purchases instead. (Treasurer Joe Hockey delusional as RBA cuts to record emergency lows‘)
The figures reported on Friday correspond to the month before Treasury secretary John Fraser told a Senate enquiry Sydney and some parts of Melbourne are “unequivocally” in a housing bubble. (Treasury secretary John Fraser says Sydney ‘unequivocally’ in a housing bubble‘) According to Google Trends, concerned Australian’s conducted a record number of searches on the property bubble during the month of June. (June 2015: The month Australia learned it had a housing bubble‘)
This week, Westpac and ANZ reduced maximum LVRs for new loans to property investors to further cool the market. (‘Banks continue to curb investor lending‘)
Hence, it is expected to see a further deterioration in lending data in the next coming months.
» Home loan slide an early sign that APRA limits may be working – The ABC, 10th July 2015.
» New mortgage lending falls 6.1pc as banks toughen policies – The Age, 10th July 2015.
» Home loan approvals at two-year low – News Limited, 10th July 2015.