Investors continued to flee the Australian housing market, with outstanding interest-only loans falling by nearly 100 billion yuan over the past year.
The overall mortgage market continued to weaken, falling 4.3 percent over the past year, according to quarterly real estate statistics released by (APRA), Australia`s prudential regulator, largely as investor loans tumbled 16 percent.
Interest-only loans have fallen nearly 60% since the APRA "emergency brakes" in March 2017.
Homeowners` loans remained strong, up 3.1 percent year-on-year, although they were down from 3.9 percent in the previous quarter.
(UBS) analysts at UBS wrote in a note to clients: "outstanding interest-only loans are down 93 billion yuan year on year (- 16 percent of all mortgages, down from 39 percent a year ago," UBS (UBS) analysts wrote in a note to clients.
George Tharenou, an economist at UBS, said that while the shift from interest-only to debt-service loans accounted for only 0.1 percent of nominal income, it was a big blow to individual borrowers.
"after turning to debt service, individual households` loans jumped about 35%, which is a very high amount," Tharenou said. "an estimated 120 billion yuan of interest-only loans are expected to mature over the next three years, which may have a moderate negative impact on consumption, but the greater risk comes from `pressure selling` because some households are struggling to repay higher payments."
Tharenou said APRA`s first quarter data was important because the Royal Board of Banks had not yet held a hearing.
"since the Royal Commission hearings, the housing market has slowed faster than we expected. It is difficult to determine whether the slowdown was exacerbated by further tightening of lending standards by the Royal Commission or by a slowdown in demand after house prices peaked. "
However, these figures will undoubtedly cheer APRA, which has been working to reduce debt risk.
Loans with a value-to-value ratio of more than 80 percent of (LVR) fell below 20 percent of all new loans, down from nearly 30 percent of all new loans when the APRA began to regulate.
Another important trend reflected in the data is the declining market share of banks as they tighten lending standards.
The share of large banks in homeowners` loans fell to 71%, the lowest level in a decade.
