The Australian home loan market has been hit by the most dramatic slide in home loan sizes since 2000, according to a new study from comparison website Finder.com.au.
Analysing data from the Australian Bureau of Statistics, Finder found that banks are pulling back on mortgage lending as the national average home loan size falls to $357,200, equating to a dip of 4.08% in February 2016 compared to the previous month.
Furthermore, the national home loan size has decreased by 7.71% (or $29,100) in total in the past three months to February, marking the biggest three-month drop since May-July 2000, when the decline was 7.74%. February 2016 also marks the first time that the average loan size has dropped by more than 1% in three consecutive months.
The steepest decline was to be found in New South Wales, where the average home loan size shrank by 5.75% in February. On a quarterly scale, the average home loan size in New South Wales dropped a huge 10.15% ($45,500), the biggest decline on record.
Bessie Hasson, financial expert at Finder, believes the decline is due to tougher bank lending policies that were introduced in 2015.
"A cooling property market has led to shrinking maximum loan sizes following the Australian Prudential Regulatory Authority's changes to investment lending," she said.
"Banks are scrutinising new loan applications more closely, taking a tougher line when assessing borrowers' income."
When asked by Australian Broker what the consequences of the decrease in home loan sizes might be for mortgage brokers, Hasson said, “With loan sizes shrinking and interest rates competitively low, mortgage brokers will have to work harder to drum up the same level of business as they did before mid-2015.”
“Not only this, but the actual number of people applying for loans is slowing also.”
“Thus, we can expect a lot more competition in the home loan market, which may be a good thing for first time buyers who are lucky enough to have a deposit saved, but may not be for some small lenders who may struggle to compete.”
