Australian Mortgage Approvals Drop Most in Five Years in May

Australian home-loan approvals fell in May by the most in more than five years as the country’s banks tighten lending criteria.

The number of mortgages approved for owners that occupy their home fell 6.1 percent in May from April, the largest drop since December 2009, according to government data released Friday. In New South Wales, which counts Sydney as its capital, such approvals fell 5.9%, the most since February 2012.

Lenders have tightened mortgage standards after a 43 percent surge in home values in Sydney since May 2012 fueled concerns of a property bubble. Banks have removed interest-rate discounts on home loans to investors and this week cut the loan-to-value ratio for landlords.

The value of mortgages for investors fell 3.2 percent in May from April, the most since March 2012. Still, investors accounted for 52.5 percent of all mortgages approved in the month, the highest proportion on record. The Reserve Bank of Australia said last year that investors were distorting the housing market, while the Australian Prudential Regulation Authority in December urged lenders to limit investor home loan growth to 10 percent a year.

“A reduction in approvals is a result of lenders responding to regulatory action,” said Omkar Joshi, Sydney-based investment analyst at Watermark Funds Management. “However, the curbs have resulted in a bigger drop for owner occupiers than investors in the latest housing finance approvals and that isn’t a good outcome.”

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