Banks are trimming down interest-only loan approvals due to stricter lending rules.

The stricter lending environment has resulted in a significant reduction in interest-only loan approvals over the past quarter, according to figures from the Australian Prudential Regulation Authority (APRA).

Citing APRA’s data, reported that interest-only loans declined by 54.9% over the last quarter. As a result, interest-only loans now make up 16.2%, or $61.2bn, of new home loan approvals. For the first six months of the year, the total value of new home loans sat at $94.6bn, which is 4.1% lower than last year.

Investor home loan approval growth also decelerated during the quarter by 12.4%. Investor home loans account for 31.1% of new home loans, representing $117.5bn.

Meanwhile, owner-occupier loan growth sped up, growing by 4.3%. Owner-occupier lending now takes up 68.9% or $260.6bn of new home loan approvals.

New figures also showed that the number of mortgage applications with a loan-to-value ratio of more than 80% has already declined. Mortgages with LVR of over 80% and less than 90% have fallen by 6.2% while loans with greater than 90% LVR have significantly deflated by 12.2%.

Overall, banks were not too easy on loan applications over the quarter, as approvals declined by 1.5%.