Increasing number of loans being reclassified

The RBA’s financial aggregate figures for August 2017 show that, while the growth in credit for housing held firm at 0.5 per cent for that month, on a yearly basis, it rose by 0.1 per cent (to 6.6 per cent).

According to the figures, informed by those from the Australian Bureau of Statistics (ABS), the Australian Prudential Regulation Authority (APRA) and the RBA’s own figures, home lending grew by nearly $10 billion between July and August 2017, rising to $1.691 trillion (up from $1.682 trillion).

This was largely driven by a rise in owner-occupier loans, which rose to $1.11 trillion. Meanwhile, investor lending, which has been subject to macro-prudential controls, rose marginally from $581.2 billion to $581.9 billion.

The Reserve Bank noted that the number of borrowers changing the purpose of their existing loan has risen since mid-2015, when differential interest rates for investors were introduced.

Indeed, since July 2015, $58 billion of investor loans have been reclassified as owner-occupier.

The RBA said: “The net value of switching of loan purpose from investor to owner-occupier is estimated to have been $58 billion over the period of July 2015 to August 2017, of which $1.7 billion occurred in August 2017.”

This brings the grand total of loans reclassified in the 2017 calendar year to $8.9 billion.

Speaking after announcing that the cash rate would remain unchanged at 1.50 per cent for another month, the governor of the Reserve Bank of Australia, Philip Lowe, said: “Growth in housing debt has been outpacing the slow growth in household incomes for some time. To address the medium-term risks associated with high and rising household indebtedness, APRA has introduced a number of supervisory measures.

“Following some tightening in credit conditions, growth in borrowing by investors has slowed a little recently.”

Business lending also grew by 0.5 per cent, with its yearly growth rate slowed to 4.5 per cent (from 5.8 per cent) in the 12 months to August 2017.

APRA figures show decline in lending

APRA also recently released its monthly statistics for August 2017, revealing that a total of $1.573 trillion of loans were on the book of Australian banks at the end of the month, down from the previous month’s figures when mortgages held by banks were at $1.575 trillion.

The decrease can largely be attributed to a drop in the amount of investment loans held by banks.

However, two of the big four banks (NAB and Westpac) reported an increase in investment loans between July and August 2017, with NAB’s investment book rising from $103.5 billion to $103.9 billion and Westpac’s book growing from $147 billion to $148 billion.

CBA saw the largest drop in investment loans — from $134.8 billion in July to $134.2 billion in August — and the biggest increase in owner-occupier loans.

[Related: $1.3bn of loans reclassified as housing credit grows 6.6%]