Interest rate cuts and changes to mortgage serviceability guidance have not been enough to spark a quarter-on-quarter increase in home loan volumes, according to the latest APRA data.
The Australian Prudential Regulation Authority (APRA) has released its latest quarterly property exposures data, reporting a decline in mortgage settlements by authorised deposit-taking intuitions with more than $1 billion in assets.
The data revealed that in the three months to 30 September 2019, banks settled $89.4 billion in new home loans, down from $89.7 billion in the September quarter of 2018.
The decline was driven by a slide in the value of new investment loans settled over the quarter, from $27.1 billion to $26.1 billion.
However, owner-occupied volumes also fell, down from $62.5 billion to $62.3 billion.
This came despite a 2.1 per cent increase in the average loan size, from $273,700 in the September quarter of 2018 to $279,400.
The annual reduction in mortgage volumes was reported despite the touted increase in demand for finance off the back of the Reserve Bank of Australia’s (RBA) cuts to the cash rate and APRA’s changes to mortgage serviceability guidance.
The APRA statistics also revealed that, of the home loans settled over the September quarter, $12.4 billion were for interest-only borrowers, down from $14.4 billion in the same quarter last year.
Conversely, the number of mortgages with a loan-to-value ratio (LVR) of 80 per cent or above increased, rising from $18.6 billion to $20.5 billion.
However, the proportion of low-doc loans and loans settled outside of serviceability fell, from a combined $4.79 billion to $3.87 billion.
When broken down by origination source, the proportion of loans originated by the third-party channel remained stable at 50.1 per cent.
In total, the combined residential mortgage portfolio of Australia’s ADIs increased by 2.9 per cent, from $1.61 trillion to $1.66 trillion.
The release of APRA’s property exposure statistics coincided with the publication of its quarterly performance statistics, which revealed that the collective net profit after tax of the ADI sector fell by 4.1 per cent, from $35.8 billion to $34.4 billion.
This comes as several lenders, including the big four banks, have partly attributed declines in their underlying earnings to subdued credit growth.