The security coverage and asset quality of ADIs’ mortgage portfolios improved in the December quarter, with big falls in high loan-to-valuation and high debt-to-income loans, APRA reported in its latest industry update.
The share of new mortgages at LVRs of 90 per cent or more fell from 7.9 per cent in the December quarter 2021 to 5.9 per cent in the December quarter last year. New lending at LVRs of 90 per cent or more has fallen from a peak of 11.3 per cent in 2020.
New lending at debt-to-income ratios of six times or more fell from 24.3 per cent in the December quarter 2021 (the series peak) to 11 per cent in the December quarter last year.
Interest-only mortgage lending share was steady at 19.2 per cent and accounts for 11.1 per cent of total mortgage outstandings.
APRA said the data are yet to reflect any notable effects of lending rate increases on non-performing loans, although “there is typically a lag in transmission”.
Non-performing loans as a proportion of total mortgage outstandings fell from 71 basis points in the September quarter last year to 68 bps in the December quarter. The trend was consistent for owner-occupier and investment loans.
The proportion of loans between 30 and 89 days past due rose from 34 bps in the September quarter to 42 bps in the December quarter. This compares with the pandemic peak of 81 bps in the March quarter 2020.
The value of deposits in offset accounts grew 9.5 per cent year-on-year to A$244 billion in the December quarter – the highest value recorded since the series began.
APRA said: “ADIs’ profitability, asset quality, capital and liquidity positions remain strong.”