Investment lending still flourishing

Bigger banks are riding the recent wave of demand for housing credit.

Banks with greater than A$1 billion in housing loans approved $96 billion of new loans over the June 2015 quarter. This was an increase of $10.5 billion or 12 per cent on the June quarter of 2014, and an increase of 18 per cent on March 2015.

Overall the banking industry lifted housing lending by 7.9 per cent, so shifts in market share are underway to the detriment of smaller entities.

Much of this loan supply is for investment lending, a policy conundrum for APRA-regulated entities and the regulator.

Investment loans jumped more than 20.4 per cent over the quarter, more than twice the level APRA aims for banks in aggregate to report.

Big banks lifted investment lending by 20.6 per cent over the three months to June.

The Australian Prudential Regulation Authority first spelt out its intent to corral growth in investment lending in late 2014.

The continued vibrancy revealed in the latest data only underscores the rationale for the tightening in lending criteria and higher pricing that began to work its way through the product side of this market a couple of months ago.