Continuing our analysis of the APRA ADI data to September 2017, we will look across the various metrics for new loans, and by lender category.
APRA reports new flows by Major Banks, Other Banks, Foreign Banks and Mutuals (Credit Unions and Building Societies).
Looking first at third party origination, we see that origination from foreign banks is sitting at 70% of new loans, mutuals around 20% and other banks around the 50% mark. Overall, volume through brokers is climbing.
There has been a spike in loans being approved outside serviceability, with major banks reporting 5% or so in September. This may well reflect a tightening of standard serviceability criteria and the wish to continue to grow their loan books.
So overall, we see the impact of regulatory intervention. The net impact is to slow lending momentum. As lenders tighten their lending standards, new borrowers will find their ability to access larger loans will diminish. But the loose standards we have had for several years will take up to a decade to work through, and with low income growth, high living costs and the risk of an interest rate rise, the risks in the system remain.