If there is anything that can prove the impact of stricter lending rules by lenders in Australia, it would be the latest data on home-loan rejections.
According to Digital Finance Analytics (DFA), 40% of home-loan applications were rejected in December due to non-compliance with existing lending standards.
While this is a drop from the previous month's 48% rejection rate, it is still significantly higher than last year's 8%. It is important to note that the volume of applications across all segments leading up to the holiday season has decreased and that many households have filed multiple home-loan applications.
"The fall in investor applications is significant, as appetite for investment property eases. The relative volume of refinance applications remained quite high, as people are seeking to reduce their monthly repayments," DFA principal Martin North said.
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Compared to authorised deposit-taking institutions (ADIs), non-banks recorded lower rejection rates at 20%.
North expects the number of rejections to remain prominent this month as the number of loan applications continues to grow.
For investors, he suggested watching the availability of credit, as moderation of loan offerings could result in a price decline of up to 30%.
"As credit drives home prices higher, so the reduced availability of credit drives prices lower. Our own view is a fall of 20%-30% peak-to-trough over the next two to three years," North said, adding that the fall could worsen if global uncertainties are factored in.