The steady strangulation of investors in the property market has intensified with the outstanding value of interest-only loans falling by almost $100 billion over the past year.
The Australian Prudential Regulation Authority's (APRA) quarterly property statistics show while the overall mortgage market continued to soften, down 4.3 per cent over the year, this was largely due to a investor loans plummeting 16 per cent.
Interest-only (IO) loans have now collapsed almost 60 per cent since APRA slammed the brakes on them in March 2017.
Owner-occupiers have remained resolute, with loans up 3.1 per cent over the year, although this is still a step down from the 3.9 per cent growth in the previous quarter.
"The outstanding stock of IO loans has now slumped $93 billion year-on-year [-16 per cent] with interest only-loans making up 31 per cent of all mortgages, down from 39 per cent a year ago," UBS analysts wrote in a note to clients.
UBS economist George Tharenou said while the switch from IO to principal and interest (P&I) loans was a modest 0.1 per cent, or $1.6 billion, of nominal income across the economy, it hit individual borrowers harder.
"For individual households the [around] 35 per cent increase in repayments is significant," Mr Tharenou said.
"With $120 billion of IO loans expected to mature every year for the next three years, this is likely to remain a modest negative for consumption, but the larger risk is from 'stressed selling' as some households struggle to meet the higher repayments."
'End of the beginning' of housing correction
Mr Tharenou said it was significant the APRA figures relate to the first three months of the year, before the bank royal commission hearings started.
"Since the royal commission the housing market has slowed faster than we anticipated," he said.
"It is difficult to determine whether this slowdown was exacerbated by a further tightening in underwriting standards as a result of the royal commission, or whether a slowdown in demand was already in train as house prices peaked.
"It appears clear that the first quarter of 2018 was the end of the beginning of the housing market correction."
However, the figures will no doubt please APRA, which has been working assiduously to de-risk balance sheets.
Mortgages at the riskier end of the spectrum with loan-to-value ration above 80 per finally fell below 20 per cent of all new loans, down from closer to 30 per cent when APRA started turning the screws.
The other key trend in the figures was the ongoing loss of market share controlled by the big banks as they move to tighten their lending standards.
Major banks share of owner-occupier loans fell to just 71 per cent of new loans, the lowest level in 10 years.
