Investment and interest-only lending levels moderate

Investment lending and other types of home lending activity that have been worrying regulators over the past year moderated in the March quarter but there may be some way to go before the Australian Prudential Regulation Authority and the Reserve Bank are satisfied that the market is back in balance.

According to APRA's latest report on authorised deposit-taking institution property exposures, the proportion of investment loans, interest-only loans and high loan-to-valuation ratio loans fell in the March quarter, compared with the December quarter.

However, looking longer term some of these measures remain elevated.

Investment loans accounted for 36.9 per cent of the value of new housing loans approved by authorised deposit-taking institutions during the March quarter, compared with 37.3 per cent in the December quarter.

In the March quarter last year, however, the proportion of investment loans was 35.7 per cent of new approvals.

Interest-only loans made up 42.3 per cent of the value of new housing loan approvals in the March quarter, compared with 42.9 per cent in the December quarter.

However, in the March quarter last year the proportion of interest-only loans was 39.4 per cent of new approvals.

Loans with LVRs of 90 per cent or more made up 11.1 per cent of the value of approvals in the March quarter - down from 11.4 per cent in the December quarter and 13.4 per cent in the March quarter last year.

Loans with LVRs between 80 per cent and 90 per cent made up 21.7 per cent of the value of approvals in the March quarter, compared with 21.9 per cent in the December quarter and 22.2 per cent in the March quarter last year.

Low-doc loans are still a tiny segment of the market, accounting for 0.7 per cent of loan approvals in the March quarter.