A leopard may not be able to change its spots, but it seems property investors can easily change the purpose of their loans.
The most recent private sector lending data from the Reserve Bank shows investor lending grew by just 0.4 per cent in June, the weakest monthly result in more than a year.
However, the slowdown in overall lending is far more muted.
Over the year, while investor lending growth has declined, owner occupier lending has accelerated.
A breakdown from Westpac shows on a quarterly basis there is evidence of a tentative slowdown in housing credit.
Westpac's Andrew Hanlan noted while some volatility was expected, the downward trend should continue as the impact of the APRA-induced rate hikes from the commercial banks bite.
The $55 billion switch
So while owner-occupier growth is softening the blow to the property market and filling the gap left by investors, what is happening within that shift?
UBS bank analyst Jonathan Mott suggests there are two dynamics at play.
"Given first home buyers are still near record low, this implies a rapid acceleration in 'upgraders' purchasing bigger homes'," Mr Mott said.
Then there is the issue of the big switch, where investors do their sums and realise they are better off taking advantage of cheaper owner-occupier loans, rather than sticking with an investor mortgage and its implicit taxpayer-subsidised, negatively geared advantage.
"Some investment borrowers are telling their lender they intend to occupy the property to benefit from lower interest rates," Mr Mott said.
"While it is plausible that there has been an increase in upgraders, we would not be surprised if borrowers are tempted to apply for or re-classify themselves as owner occupiers, given the around 60 basis point differential in interest rate between owner occupier and investor loans."
The RBA's private sector credit figures show the net value of switching of loan purpose from investor to owner-occupier is estimated to have been $55 billion between July 2015 and June 2017.
In June another $1.3 billion worth of loans were switched from investor to owner-occupier, according to RBA figures.
Almost 30pc of loan applications false: UBS
Mr Mott said the switch is consistent with UBS research from late last year which found 28 per cent of mortgagors stated their application was not factually accurate.
Those results were disturbing given the heightened level of household debt — currently almost double household income — and the fact that mortgages accounted for more than 60 per cent of bank loans.
Despite tighter lending rules from APRA and banks pushing up investor rates, house prices have continued to climb.
Melbourne house prices rose another 3.1 per cent in July, up 16 per cent over the year, while Sydney prices climbed another 1.4 per cent to be up more than 12 per cent in the past 12 months.
Banks will lose, Tax Office will gain
So is the big switch likely to continue?
Mr Mott believes it will given the likelihood that APRA is yet to finish tightening the screws on investment loans.
"While it is likely to take time for the banks' recent mortgage repricing to take effect, we believe that unless the housing market and growth in household debt slows considerably APRA is likely to further tighten macro-prudential measures in the second half of 2017."
Mr Mott said this would be straight out of the playbook of regulators in Singapore and New Zealand who employed multiple tightenings before they were satisfied the heat had been taken out of property speculation.
While that won't make the banks happy — investor loans are currently gifting them bigger margins and profits — the Tax Office may find it won't have to hand back as many negatively geared deductions to investors who have decided to move "back home".
