Australian Bureau of Statistics home loan data was weaker in February, in terms of both the number and volume of home loans, and for both investors and owner-occupiers. The decline could be an early sign that tighter lending rules are beginning to take effect.

The value of owner occupier and investment loans fell by 2.7 per cent for the month.

The number of loans for owner-occupiers fell by 0.5 per cent in February (although excluding refinancing, the number of loans was up by 1 per cent).

Investment loans fell by 5.9 per cent.

The value of loans by owner-occupiers and investors to build new homes fell by 4.7 per cent in February.

The data shows that 54,816 home loans were written in February, down from 55,099 the previous month.

The ABS data highlights moderating investor housing finance, said Malcolm Gunning, president of the Real Estate Institute of Australia.

The data comes before last week’s actions by regulators and banks to limit bank lending in an attempt to dampen investor demand for property in Sydney and Melbourne, pointed out Gunning.

“The February figures show that the market is adjusting and we will need to closely monitor the cumulative impact of recent actions by the regulators and banks to ensure that they don’t threaten economic growth," said Gunning.

Shane Garrett, senior economist Housing Industry Association, said of the decline in lending, "With housing affordability now such an important issue on the policy radar, it is critical that settings remain favourable to the delivery of new housing supply at reasonable cost."

The decline may be the first signs that the tighter lending restrictions adopted by the banks are beginning to have an impact on investor borrowings, said Craig James, chief economist CommSec. But he added that it's still early days, and said the data over the next couple of months "will be more telling".

“After three consecutive months of growth in home loan approval numbers, we saw a decrease in February,” said John Flavell, chief executive officer of Mortgage Choice. 

Flavell said the result could at least by partly cyclical. "January and December are notoriously strong months in terms of home loan demand and we then tend to see a drop off in home loan approvals come February," he said.

Home loan approvals and the total value of all home loans are still strong by historical standards, said Flavell. 

Flavell said that tighter lending rules and higher interest rates with many of Australia’s lenders could cause home loan demand to tumble.  

“Over the coming months, we expect to see lending for investment housing to decrease a lot," he said.

See also:

Affordable housing in, negative gearing stays, says Treasurer

APRA tightens bank rules to restrict risky lending

Other lenders fill the gap as big four clamp down on foreign borrowers