Mortgage lending has spiked after banks softened the criteria for checking borrowers’ ability to pay back loans.
The value of loans granted to housing investors and owner occupiers spiked in July by a seasonally adjusted 3.9 per cent to $32.24 billion, with Australian Bureau of Statistics data showing mortgages to owner-occupiers increased by a better-than-expected 4.2 per cent to 32,427 for the month.
The rise revealed Monday came in the same month that the Australian Prudential Regulation Authority’s easing of loan serviceability standards took effect, with banks no longer expected to ensure customers could still repay loans at a minimum 7.0 per cent interest rate.
Instead, lenders can now set their own minimum rate floor and use a 2.5 per cent buffer, which the prudential regulator acknowledged could mean larger loans for some.
The value of loans to owner-occupiers shot up 5.3 per cent to $13.3 billion for July – well above expectations of a 1.5 per cent rise – while the value of investor loans jumped by 4.7 per cent to $4.6 billion.
Total lending for the month increased by 1.3 per cent to just over $65 billion.
The business lending decline slowed to 1.1 per cent to $32.78 billion, following a 16.5 per cent decline in June.
Meanwhile, the number of loans for the construction of new dwellings fell by 1.6 per cent to 5,204.