National Australia Bank is growing its loan book faster than its major rivals and Macquarie Bank is still surging ahead on its home loan grab, contributing to loans to investors staying above the average 10 per cent cap the banking regulator wants to impose.
In the year to December, loans to investors in houses grew by 10.76 per cent and to owner-occupiers by 6.5 per cent, according to data from the Australian Prudential Regulation Authority.
APRA told banks on December 9 it will be increasing its scrutiny of lenders whose annual growth in loans to investors are above 10 per cent. It also wants a minimum buffer of 2 per cent above the prevailing interest rate to be applied to credit assessments and a minimum interest rate floor of 7 per cent.
Investor loans grew by 0.95 per cent in December, faster than the average annual rate of 0.89 per cent a month for the year to December. Among other factors, such as a falling dollar and oil price, the fast clip of investor loans in December credit figures has given some economists reason to forecast the RBA will not cut rates on Tuesday, although many think there will still be up to two cuts before the end of June.
“Annual growth in investor credit accelerated again and further encroached into concerning territory for the prudential regulator,” noted Bank of America Merrill Lynch economist Saul Eslake. APRA’s moves in December were widely seen as a way to remove concerns the RBA has that cutting interest rates further will only fuel investor appetite and sharp rises in house prices in Sydney and Melbourne.
NAB grew its loan book 0.7 per cent in December to reach 7.2 per cent for the year. It achieved 1.2 times average system home loan growth in the quarter to December 14, ahead of next-fastest ANZ Bank, which kept pace with system growth. NAB’s growth was led by loans to investors, which grew 2 per cent above APRA’s cap at 12.4 per cent, twice its loan growth to owner-occupiers.
However, Westpac Bank achieved the fastest rise in business loans, up 1.7 per cent in December and 4.9 per cent for the year, or about 2.2 times the average business lending growth. Westpac has been gaining share in business loans where NAB traditionally dominates, but NAB managed to keep pace with overall business lending system growth in December of 0.5 per cent.
Macquarie Bank has recorded by far the fastest growth in home lending of any institution, but it still only has 1.6 per cent of the mortgage market.
For the year to December, its loans to owner-occupiers rose by 62 per cent and to investors by 107 per cent. However, the growth rate is slowing now with owner-occupier home loans up 2.13 per cent and investor loans up 3.14 per cent. This compares to a monthly average growth of 5.16 per cent for owner-occupiers and 8.9 per cent for investor loans.
Suncorp Bank’s investor loan book grew the fastest among the regional banks for the year to December at 11.6 per cent, but this fell back to 4.5 per cent growth for the December quarter.