Home lending to property investors fell for the second straight month in May, providing early evidence that the curbs enforced by the Australian Prudential Regulation Authority (APRA) to cool the country’s red-hot property market are starting to take effect.

Data from the Australian Bureau of Statistics (ABS) showed that investor lending had shrunk 1.4% from April to May, hitting a nine-month low.

Meanwhile, the value of cancelled loans climbed approximately 17% to a 10-month high of $1.44bn, as more people pulled out of deals. In contrast, lending to owner-occupiers edged up 1%.

“The home loan data had the right mix in May – more loans to budding home owners and fewer loans to investors,” said Craig James, chief economist at CommSec. “It is also important to remember that lenders may agree to provide finance to buy a home but borrowers may not take up the offer. More budding property owners are getting cold feet and not going through with the deal.”

The Reserve Bank, long worried that debt-fuelled speculation in property would ultimately hurt both consumers and banks, has welcomed the much-awaited slowdown in lending.

Household debt is already at 190% of disposable income, which prompted the Reserve Bank to leave interest rates at 1.5% this month. To control the market, policy makers have focused on tightening the rules on home lending, as well as placing curbs on the interest-only loans favoured by investors.

In response, banks hiked rates on interest-only home loan debt from April to June.

While growth in home prices appears to be moderating, it remains uncomfortably strong in Sydney and Melbourne.