Home loan approvals fell in April, and while the drop was not as great as economists had forecast there are expectations the housing market has continued to soften in recent weeks.
The number of home loan approvals for owner occupiers dropped 1.4 per cent in April, seasonally adjusted data from the Australian Bureau of Statistics shows, compared with market expectations of a 1.8 per cent decline.
Westpac senior economist Matthew Hassan says more recent data, particularly from auctions, suggests the property market has weakened further since April, possibly as a result of banks applying tighter lending criteria.
“With more stringent assessments also likely to delay loan processing, finance approvals could see a more significant decline in the next few months,” Mr Hassan said in research report.
The Australian Prudential Regulation Authority abolished its 10 per cent cap on investor loan growth in April, and said banks and other lenders must introduce policy limits on maximum debt-to-income levels for individual borrowers.
The cap, which was introduced in late 2014, required banks to limit growth in lending to housing investors to 10 per cent.
APRA also required commitments from lenders to more thoroughly check the current spending and debt levels of owner-occupier borrowers, Mr Hassan said.
“There’s likely been some further tightening in lending criteria, stemming from that APRA announcement,” he said.
“It will vary from lender to lender so it makes it difficult to tell exactly how material the changes have been.”
The number of first home buyer commitments as a percentage of total owner-occupied housing finance commitments rose to 17.6 per cent in April from 17.4 per cent in March, according to the ABS.
The average loan size for first home buyers rose $7,200 to $342,800 in April, while the average loan size for all owner-occupied housing commitments rose $10,200 to $398,500.
The value of total housing finance was down 0.2 per cent at $31.74 billion for the month, while the value of new home loan approvals for owner-occupiers was up 0.2 per cent, while the value of investor loans was down 0.9 per cent.
The Australian dollar showed little reaction to the data, rising from 75.974 US cents ahead of the 1130 AEST release to be trading at 76.10 US cents at 1233 AEST.