Banks continue to turn their backs on riskier home loans: RateCity

Banks continue to turn their backs on riskier home loans, as the value of new interest-only and low doc loans hit record lows, according to APRA data released today.

APRA’s Quarterly ADI Property Exposures for the March 2019 quarter shows the value of new loans to owner-occupiers fell by 17.6 per cent from the previous quarter, while the value of new loans to investors fell by 18.7 per cent in the same time frame.

The value of new interest-only loans fell by 22.5 per cent between December and March to 14.9 per cent of all loans, the lowest percentage share in APRA’s records dating back to 2008. 

RateCity.com.au research director Sally Tindall said banks were continuing to be hyper-vigilant in the wake of the Royal Commission, despite the easing of regulations.

“APRA might have loosened the strings on interest-only and investor lending but the banks are still ultra-cautious when it comes to high risk loans,” she said.

“APRA had wanted less than 30 per cent of new loans written to be interest-only. The banks have well and truly smashed this out of the park.

“Not only do interest-only loans represent just 14.9 per cent of all new loans written, they also represent just 23.3 per cent of the banks’ entire loan books, according to the most recent data,” she said.

The data released today by the Australian Prudential Regulation Authority showed that over the past 12 months the customer owned banking sector’s housing loans have increased by 8 per cent while the major banks grew by just 2.6 per cent.

Australia’s customer owned banking institutions now hold more than $119 billion in assets, an increase of 1.6 per cent compared to the previous quarter. 

Consumers are also choosing to place their deposits with customer owned banking institutions. The sector now holds more than $101 billion in deposits. The growth in deposits shows a 6.5 per cent year on year increase in deposits.

Customer Owned Banking Association CEO Michael Lawrence said consumers are sending a clear signal to the major banks.

“Consumers are sending a very clear message to the major banks; either put our interests first, or we’re going somewhere that will.

“The latest figures from APRA paint a clear picture of a sector that is continuing to grow as more Australians begin considering who it they choose to bank with.

“Australians want banking institutions they can trust to put their interests first and to do the right thing by them. After the findings of the Financial Services Royal Commission it’s no surprise people are looking beyond the ‘Big Four’.

“Consumers can see through the spin of the major banks. They know a leopard can’t change its spots, that’s why they’re taking their banking elsewhere"