Yahoo Finance Lending to property investors jumps amid rising rents
Lending to property investors has picked up, reflecting favourable conditions in the rental market and the willingness of banks to provide finance to landlords.
Over April, the Australian Bureau of Statistics recorded a 5.6 per cent increase in the value of new loans to investors, which was 36.1 per cent higher than a year ago.
Bureau head of finance statistics Mish Tan said lending to investors was rising strongly, and largely due to the size of the loans, likely reflecting "expectations of higher rental yields and the greater borrowing capacity of investors".
Rents have been rising fast and more quickly than home values, allowing rental yields - the difference between rental income rent and investment costs - to trend higher.
Lending to investors was also outpacing the value of owner-occupier loans, which rose 4.7 per cent over the month and 18.8 per cent over the year, after excluding first home buyers.
The value of first home buyer loans rose 3.4 per cent, to be 18.6 per cent higher than a year ago.
Canstar finance expert Steve Mickenbecker said the lending market crashed when interest rates started going up in 2022 but had since "found a floor".
"Increased interest rates have put a whole group of borrowers under extreme pressure, especially those who borrowed in the couple of years preceding cash rate increases, and that pain continues," the finance expert said.
"But new borrowers are putting it behind them."
Mortgage holders under pressure will be waiting a while for interest rate cuts, even after decidedly weak growth numbers for the March quarter.
The meagre 0.1 per cent rise in economic growth in the three months to March, announced on Wednesday, was slightly below forecasts, and marked the fifth consecutive quarterly fall on a per-capita basis.
Sluggish growth has most economists predicting the next interest rate move will be down, but lingering price pressures suggest borrowers will be waiting a while.
EY chief economist Cherelle Murphy said the national accounts data revealed an "unwelcome pressure point" in the form of strong demand for travel and accommodation around the Formula One event and the Taylor Swift and Pink concerts.
With the job of returning inflation to target not yet done, the economist said interest rates were likely to stay on hold "for some time".
Reserve Bank of Australia governor Michele Bullock confirmed she was keeping her options open during a parliamentary hearing on Wednesday, ahead of the national accounts data.
Slower-than-expected growth would trigger the central bank to consider a cut, but on the other hand, stickier-than-expected inflation or a further price increase could be enough to have the board hiking again.
