APRA's investor lending restrictions taking shape

The latest report from CoreLogic RP Data shows the first sign that investor lending is slowing since the Australian Prudential Regulation Authority (APRA) announced the 10 per cent cap on the growth of lender investment portfolios.

A major focus for the year, the pace of investment lending hasn’t fallen below APRA’s 10 per cent benchmark, however we’re starting to see signals that the investment lending sector is slowing.

In the CoreLogic RP Data statement released on 1 October, it notes the most recent RBA credit aggregates shows that investment credit growth slowed to a monthly rate of 0.6 per cent (to July 2015), which is its slowest monthly increase since October 2013.

Many lenders - including the Big Four banks - are increasing interest rates on investor home loans, and due to this we could be seeing the initial signs of a cooling in the demand for property investment.

Although this slowing is a positive sign for housing market conditions, there’s evidence that investors are still active in many markets.

According to CoreLogic RP Data, investors make up 62 per cent of the value of all new housing finance commitments in New South Wales and 53 per cent across Victoria.

The combination of tighter lending conditions and higher interest rates for investment home loans could lead to the cooling of the Sydney and Melbourne housing markets.