In total banks held $95 billion in mortgage lending in the March 2020 quarter - up 20.1% on the same quarter in 2019, but down 10.9% on the December quarter, according to the Australian Prudential Regulation Authority's (APRA) quarterly statistics released on Authorised Deposit-taking Institutions (ADIs).
APRA's report said, "This likely reflects the seasonality of the housing market and potential early changes in borrower sentiment with the onset of COVID-19".
High loan-to-value ratio (LVR) loans of 95% also saw the highest growth in percentage terms out of any ratios, up from 1.5% of total loan books to 1.9% in a year.
In March 2019 total 95% LVR ratio values amounted to $1.174 billion of the total loan book of just over $78 billion, while in March 2020 that value was $1.791 billion in a total loan book worth about $94.5 billion.
However, high-LVR loans make up a small segment of the market and could decrease as banks look for 'safer' borrowers.
"Given the current heightened risk environment, a shift in new lending away from higher LVRs is possible," the APRA report said.
This is evident anecdotally as many lenders are cutting rates for borrowers with 70% LVRs or less, however the higher LVR lending could be buoyed by the Government's First Home Loan Deposit Scheme, which was launched in January.
Meanwhile, the interest-only portion of the loan book slid to 17.4% in March 2020, but newly-funded interest-only loans increased for the first time since June 2019, comprising 18% of the newly-funded loan book.
"Further shifts to interest-only lending are likely, with borrowers seeking flexibility in their loan conditions to meet repayments during COVID-19," APRA's report said.
Australians are also taking on more debt in proportion to their income compared to a year ago.
Just over $15 billion worth of loans were held by the banks for both owner-occupiers and investors with a debt-to-income ratio of 6x or more in the March 2020 quarter - 17.6% of the loan residential loan book.
In March 2019, that figure was just over $11 billion, or 16.5% of the residential loan book.
It should be noted that this generally coincides with property prices rebounding markedly after finding a floor in May 2019.
For reference, Australia has the second highest personal debt-to-GDP ratio in the world at 120.14%, behind Switzerland at 128.7%, according to the International Monetary Fund.
The Australian Bureau of Statistics also estimates more than half of our debt is tied up in owner-occupier mortgage lending.
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