Non-bank lenders provide housing 'buffer' but not enough to stop price falls: ANZ

ANZ says tightening in lending standards has been a significant driver of the downturn in the housing market.

As the banks tighten the reins on housing lending, anticipating a post-royal commission crackdown, non-bank lenders are providing some "insulation" for the housing market.

A slew of slowing housing indicators — including falling auction clearance rates, declining prices and a slump in building approvals — show the decreased availability of credit is starting to bite.

"The tightening in lending standards has been a significant driver of the downturn in the housing market," said ANZ economists Daniel Gradwell and Shaurya Mishra.

The economists say non-bank lenders are providing a "buffer" but do not hold enough market share to entirely offset the banks' tightening.

"We think a better appetite or ability to lend across the non-bank segment is positive news for the housing sector, as it is providing some offset to ongoing credit tightening across the APRA-regulated banks," they wrote in a note.

"However, the market share of non-bank lenders remains small, meaning that the overall environment is one of tighter credit conditions.

"We think this will continue to weigh on housing prices and construction for some time yet.

Non-bank lenders increasing market share

The latest housing finance figures showed a further weakening in the mortgage market, with new home loans falling by a larger-than-expected 2.1 per cent in August, to be down more than 10 per cent over the year.

The Reserve Bank has dismissed the idea of a 'credit crunch', saying the slowdown in lending to owner-occupiers has been modest, and tighter lending standards not affecting the majority of borrowers.

However, the growth non-bank lenders are experiencing in housing credit and market share indicates borrowers look for alternatives.

The value of owner-occupier approvals through non-bank lenders is up 16 per cent over the year, compared to a five per cent fall in bank lending.

Non-bank lenders' market share of approvals has climbed to 8.5 per cent, which ANZ says is a 30 per cent rise since the end of 2016.

"It appears that non-bank lenders are making the most of their position outside of APRA's regulatory net," said ANZ economists.

"This is not to say that non-bank lenders are playing their own game.

"An interesting feature of the APRA and RBA data is that, similar to the banks, non-bank lenders are showing a strong preference for owner-occupier borrowers."