Authorised deposit-taking institutions continued to tighten their mortgage underwriting standards in the June quarter, cutting back on new lending with high loan-to-valuation and debt-to-income ratios. According to the latest APRA quarterly ADI data, the proportion of new home loans funded during the June quarter with LVRs of 90 per cent or more was 5.2 per cent – down from 5.7 per cent in the Mach quarter. The proportion of new home loans with LVRs of 80 per cent or more was unchanged at 29.3 per cent. The proportion of new loans with DTIs of six times or more was 6.1 per cent – down from 7.5 per cent in the March quarter. This is down from the peak of 24.3 per cent in the December quarter 2021 and is the lowest level since APRA started recording the data in 2019. The proportion of non-performing home loans on ADIs’ book increased from 72 basis points to 76 bps over the quarter. APRA said this level is well below pre-pandemic levels. The increase was due more to owner-occupiers than investors. The proportion of non-performing owner-occupier mortgages rose by 5 bps to 75 bps, while the proportion of non-performing investor mortgages rose 2 bps to 70 bps. Home loans in early arrears (between 30 and 89 days overdue) rose by 2 bps and was also below pre-pandemic levels. Looking at ADIs’ total gross loans and advances, non-performing loans increased from 82 bps in the March quarter to 86 bps in the June quarter. APRA said higher non-performing business loan ratios were consistent with the recent increase in business insolvencies. APRA said asset quality metrics deteriorated but remained stronger than historical averages. But it warned that “slowing economic growth and persistent cost of living pressures presents a risk for ADI’ asset quality in the second half of the year”.