Housing finance continues to fall as banks tighten serviceability

Today’s ABS housing finance figures show a continued fall in home loan lending as the fallout from the banking Royal Commission sets in.

ABS data released today shows a 0.9 per cent drop in investor lending and an 0.2 per cent in all lending from the previous month, according to the seasonally adjusted figures from the ABS.

While these falls are relatively minor, it shows a continued slide in home loan lending. Investors have dropped 15 per cent over the year, while the total lending figures have dropped 3.2 per cent annually.

RateCity spokesperson Sally Tindall said today’s figures were further evidence of the cooling of the Sydney and Melbourne housing markets, fuelled by the tightening of banks’ lending criteria.

“APRA has been very clever in motivating the banks to improve their serviceability policies,” she said.

“Findings from the Royal Commission have also had a major impact on loan application processes, with increased scrutiny on paperwork at every step in the process.

“If you’re looking for a home loan, it’s now vitally important to get all your ducks in a row before applying,” she said.

APRA’s serviceability guidelines include:

  • interest rate floors of above 7 per cent
  • interest rate buffers of at least 2 per cent.
  • greater scrutiny of high debt to income borrowers and
  • the implementation of maximum debt to income levels.

Tips for assessing how much you can borrow:

  • Make sure you have a decent deposit of at least 20 per cent
  • Check you can comfortably service your mortgage if rates hit 8 per cent.
  • Be prepared for increased paperwork.
  • Consider cancelling excess credit cards as they could hurt your capacity to borrow.

 ABS Housing Finance April figures – percentage change

Owner-occupier housing finance+4.2%-0.7%+0.2%
Investor housing finance-15.0%-8.7%-0.9%

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