Interest rates and the cost of living are holding back mortgage lending

Loans to investors, however, rose 6.4% month-on-month, the highest since November 2015, as cashed-in owners brace for the return of international students and other migrants.

“Growth in housing investment lending is likely supported by rising rental yields, low vacancy rates and the expected return of overseas migration,” APRA said.

Macquarie on Thursday reported 8% growth in its home lending business for the first quarter, but warned that investing in new technology to support business growth and tougher competition would squeeze its margins. Chief executive Shemara Wikramanayake said the bank was also carefully monitoring the impact of rising interest rates on expected credit losses.

A note from Jarden analyst Carlos Cacho examining the performance of major banks in mortgage lending showed Macquarie leading banks in lending expansion, with its mortgage portfolio up by 38.6% year-over-year through May. Its investor loans grew 40.6% over the same period.

Westpac was the biggest loser in the higher-margin investor market, with volumes down 1.7%. Chief executive Peter King said in an investor update on Wednesday that issues with lending to business customers were behind the contraction.

In homeowner loans, ANZ fell 1.7% against a 7.1% gain for Westpac.

“Our analysis reveals that Macquarie is the leader among the largest lenders, scoring high in all categories – a position they have largely maintained for over two years,” Mr Cacho said.

“Meanwhile, ANZ remains behind, driven by below-average rankings across all categories.”

Melbourne-based ANZ stepped up the intense battle for new customers in a slowing market, cutting its variable rates by half a percentage point, although it raised them by the same amount earlier in the month in response to the RBA.

“Australia’s fourth-largest lender has cut its base variable rate for new homeowner borrowers between 0.10 and 0.25 percentage points, depending on their loan-to-value ratio,” Rate City said.

“These lower rates apply to new loans and borrowers looking to refinance with ANZ.”