APRA unintentionally drives massive growth in the non bank home loan sector
The latest AFG figures have shown just how the home loan market had reacted after APRA tightened the lending restrictions for banks.
New research from CoreData reveals while the market has softened that much of the demand has started to move to non-bank lenders.
The chart on application volume data from AFG, (below) shows demand has surfaced in the the non-bank sector, which has grown at 300 percent in the past year.
"One of the best proxies for what is happening in the housing market are the figures from mortgage broking giant AFG," Simon Elwig at Core Data Group said.
"The figures show just how the market reacted after APRA tightened the lending restrictions for banks at the end of 2014 by limiting the investment book size growth for all banks to 10 percent annually.
"The banks responded in 2015.
"To do this – the banks focussed on getting only quality loans - tightening lending criteria for investors; increasing the amount of deposit required and reducing the maximum a customer can borrow as function of income.
"That’s great for the banks – but also raises a question about the yield on their lending book – riskier loans attract a premium and there’s always appetite for some of these.
"APRA hoped that this would cool the market, and it has to some extent, but of course ecomonomics doesn’t work like that, faced with a choppy sharemarket and an investment future pockmarked by risk, the demand for borrowing has simply found a new route.
"The demand has simply surfaced in the the non-bank sector, and shows no signs of burning less brightly."
"The research reveals the unintended consequence of APRA’s push to control the home investment market place," Simon Elwig noted.