Housing finance falls to record low

THE number of new home loans has fallen to an almost two-year low as the corporate watchdog cracks down on risky mortgage lending.

Home loan approvals fell 6.1 per cent to 50,366 in May, the Australian Bureau of Statistics said yesterday, much worse than market expectations.

It was the first fall in four months and the smallest amount of approvals since August 2013.

ANZ senior economist David Cannington said actions by the Australian Prudential Regulation Authority (APRA) may have been a key factor in the fall.

Late last year, APRA announced there would be greater scrutiny of lending practices, including visiting lenders to examine their loans books.

The crackdown came after a surge in investors entering the housing market drove a second year of double-digit home price growth.

“Today’s data coincides with reports of banks tightening housing investor lending conditions in May, including removing investor interest rate discounts,” Mr Cannington said.

“While this will have had some impact on investor lending in the month, we think the full effect of these changes are likely to take some months to impact on investor housing finance.”