Investor home loan growth is rising towards the 10 per cent cap set by the Australian Prudential Regulation Authority, meaning the banks could soon need to rein in their investor loaning or the regulator could be forced to sanction them, economists warn.
The value of home loan approvals rose 1.5 per cent to $39.91 billion in January, according to seasonally adjusted figures from the Australian Bureau of Statistics.
That rise was driven entirely by the value of investor loans jumping 4.2 per cent in the month, as loans for owner-occupied housing fell 0.2 per cent.
ANZ economists said growth in investor borrowing was a key concern for the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority (APRA).
APRA wants banks to limit growth in loans to investors to 10 per cent.
"The RBA noted this week that supervisory measures have contributed to some strengthening of lending standards (our emphasis), reflecting a mild downgrade from the previous months assessment that lending standards had been strengthened," ANZ economists said in a note.
Westpac economist senior economist Matthew Hassan said with investor loan growth running at 6.6 per cent in the year to January, banks or the regulator could soon need to take further action.
"Lenders will either have to start reining in growth in investor loan approvals back to a sub-10 per cent annual pace in coming months or run the risk of sanctions from the regulator," he said.
JP Morgan economist Tom Kennedy said despite the jump in investor loans against the dip in owner-occupier lending, the number of investor loans had hardly budged since mid-2016, with investor churn the likely driver of housing turnover in recent months.
"As an example, when one investor sells one property to buy another, the change in security creates a new loan (the closure of the old loan is not accounted for in the same data), while the stock data will only reflect the difference in the dollar value of the two loans," he said in a note.
"Loan reclassification from owner-occupier to investor and vice versa also is causing the flow and stock of investor loans shares to diverge."
