The number of owner-occupier mortgages approved in September dropped by 1.0 per cent, in line with market expectations, as the property market sags and banks tighten lending.
The value of total housing finance, meanwhile, was down 3.8 per cent at $29.12 billion for the month, seasonally adjusted data from the Australian Bureau of Statistics showed.
The value of new home loan approvals for owner-occupiers was down 4.2 per cent, while the value of investor loans was down 2.8 per cent.
ANZ said the fall in owner-occupier finance – down 7.5 per cent over the past two months – suggested that weaker sentiment is now having an impact on the broader market.
“Importantly, the average loan size has started to pull back,” the lender said in a release.
“This means that further weakness in house prices is likely, although smaller loans should be considered a positive development from a financial stability point of view.”
The Australian dollar dipped following the release on Friday, and was trading at 72.45 US cents at 1230 AEST.
Victoria and the Australian Capital Territory had the sharpest September drop in owner-occupier home loan approvals with 652 or 4.3 per cent fewer being approved in Victoria, and 41, or 3.7 per cent, fewer in the ACT.
Last week, CoreLogic revealed that Australian property prices are currently 3.5 per cent lower on the same time last year and falling at the fastest rate since since February 2012.
Master Builders Australia’s Chief Economist Shane Garrett said a drop in investor participation had been fuelled by a Sydney-Melbourne market decline, as well as falling rental prices, and lingering lender jitters in the wake of the financial services royal commission.
“Perhaps the biggest game changer has been APRA’s interventions, which have made it more difficult for investors to secure financing,” he said.
“With investor demand already in retreat, any policy changes at this time would be very detrimental for Australia’s home building sector.”