Name: Housing Credit Growth, Lending Crackdowns, and Australia's Riskiest Suburbs for Home Loans
Uploaded: 2019-05-16T09:39:56.000Z
Duration: 6 min 39 s
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In a report titled, “Financial Stability
Review, April 2019”, the Reserve Bank of

Past perfect

Australia stated that recent measures to reduce
high-risk lending had curbed the maximum loan

They described housing credit conditions as
being, “tighter than they have been for

some time”, which has resulted in housing
credit growth nosediving in recent years as

Owner-occupier growth, shown in orange, has
fallen significantly in the last couple of

But by far the biggest fall in credit growth
has been with investors, shown in yellow.

Quite simply, investors are pulling out of
the property market and putting their money

Interest-only loans have collapsed in the
last few years.

In early 2015, interest-only loans made up
almost 45% of new loan approvals.

Perth homeowner, Julia, has been hit by the
lending crackdown.

She said that she and her husband could not
afford the $900 jump in monthly repayments

for their investment property in Perth's south-east.

“When I came to refinance … I was told
in short there was nothing they could do anymore.

My interest-only term had expired and they
had to roll me over to principal and interest.

I've always been able to roll over my interest-only
term when that expires … and now they've

We've got two young children, a two-year-old
and a four-year-old, so the stability is everything

to us, it determines every decision we make
as a family.

This is not something I want to sell, I've
had this property for 10 years.

Property analyst, Gavin Hegney, spoke of the
looming crisis in Sydney.

“Values are off 18% in Sydney, which is
an important number because that takes away

So for those buyers, they are now probably
in negative equity situations and are probably

We'd have to go back to the mid-1970s before
we had the last credit squeeze in Australia.

Although banking has been tight before, it's
just been the drastic change — where it's

gone from quite liberal lending to quite tight
lending over such a short period of time — that's

caught quite a few people unaware and affected
the market quite significantly.”

The RBA estimate that around $120 billion
of interest-only loans are scheduled to convert

to principal and interest repayments this
year.

Most of these loans were made prior to 2015,
when lending standards were a lot weaker,

so ultimately it's going to prove quite
challenging to those borrowers when their

With regard to the stricter lending standards,
Amanda Bearcroft, a property owner in Sydney,

said that she was trying to sell her property
on the Hawkesbury River, north-west of Sydney.

But the couple who were keen to purchase it
were simply unable to secure financing, despite

“At first they were told it would be 30%,
then the banks finally came back and said

They also went through their statements for
the past year, I believe right down to the

smallest expenses, including a $9.70 charge
on the statement which turned out to be a

The banks have just got too difficult to borrow
money off.

We're really going to need a cash buyer to
come in and people don't have that cash just

Everybody that's come through and have been
interested have been told they are required

Information sourced from the data company,
Digital Finance Analytics, shows the riskiest

suburbs for home loans from a banking financial
perspective.

With higher-risk suburbs, lenders apply tighter
lending criteria and require borrowers to

find larger deposits to avoid paying costly
mortgage insurance on top of their loans.

Canberra has a relatively low risk overall.

It's riskiest postcodes include 2600 at
a risk score of 11.5, and 2603 at 11.0.

Melbourne has a number of postcodes that are
above a risk score of 20.

These include 3980, 3796, 3782, 3977, 3978,
and so on.

Sydney also has a number of suburbs that fall
in the 20 range.

These include 2106, 2105, 2101, 2083, 2754,
and 2104.

Postcodes 2106 and 2105 are the riskiest at
24.2, and 23 respectively.

Hobart postcodes 7024, 7012, 7025, 7055, 7170,
and so on, all have scores above 20.

Brisbane postcodes 4064, 4184, 4129, 4169,
4102, 4156, and 4000 are also considered quite

The following suburbs all have a risk score
greater than 25.

These include 5064, 5069, 5081, 5168, 5015,
and 5095.

But Perth is by far Australia's riskiest
city with a whole bunch of suburbs having

These include 6069, 6003, 6061, 6056, 6167…
the list goes on!

Good luck getting a loan in Perth at the moment
without a huge deposit.

Caylum Merrick, team leader of finance at
Momentum Wealth stated,

“It's probably been the most difficult time
to acquire money in a long time, so a lot

of people are probably being caught off guard.

It's a bit of a perfect storm… with the
Banking Royal Commission, that's provided

a whole other raft of challenges for borrowers
regarding serviceability.

The big thing is the way the banks are assessing
loans at the moment is a lot different to

And a lot of clients probably don't understand
that's changed and are finding all of a sudden

they can't borrow as much as what they once
[could].”

So that's the current state of the Australian
housing credit situation.

People are having a tough time getting the
finance they need to purchase the houses they

Consequently, house prices are falling as
nobody can afford the higher house prices.

By allowing people to easily borrow large
amounts of money, we're creating a culture

And unfortunately, this culture is coming
back to bite us.

We can see it in the house of cards that is
the property market as it crumbles down around