The value of loans to property investors continues to fall, underlining the effectiveness of regulatory measures introduced to cool the housing market.
The total value of housing finance rose 1.3 per cent to $33.03 billion in May, seasonally adjusted data from the Australian Bureau of Statistics showed on Tuesday.
That rise was driven by housing finance to owner occupiers, which increased by 2.9 per cent from April, while investor lending fell 1.4 per cent, which follows a fall of 2.3 per cent in April.
ANZ senior economist Jo Masters said the data confirmed a growing divergence in the trend for lending to owner occupiers and investors.
"Not surprisingly, investor housing finance continues to moderate, reflecting the combination of additional macro prudential measures, out-of-cycle rate hikes aimed at investors and various government measures," she said.
"Owner-occupier finance, on the other hand, looks solid and has recorded four consecutive monthly increases."
The Australian Prudential Regulation Authority (APRA) capped interest-only mortgage lending in the last week of March, telling lenders to limit higher-risk interest-only loans to 30 per cent of new residential mortgages.
That set off a fresh round of rate increases by the major lenders, with banks repricing their loan books to make interest-only and investor loans more expensive, in order to comply with the new limits.
Home loan approval numbers bounced back in May after declining for three consecutive months, rising one per cent in May.
But the gain fell short of the market expectations of a 1.5 per cent rise, as investment housing continued to be a drag.
Westpac economist Matthew Hassan said some of the rise in owner occupier loans is likely due to switching between investor and owner-occupier loans.
"A lift in refinancing suggests we may be starting to see existing borrowers move from interest only to standard loans," he said, pointing to data showing total new owner-occupier loans excluding refinance loans were actually down 0.1 per cent in the month.
Economists widely expect the combination of macro-prudential controls, interest rate increases and government measures to continue to slow lending, particularly to investors, during the second half of 2017.
The data gave the Australian dollar a slight boost, rising to 76.11 US cents by 1500 AEST, from its level of 76.04 US cents just prior to the release.
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