Tightened bank lending regulations and a cooling property market have combined to produce the biggest dip in average Australian home loan sizes in more than 15 years.
The size of the national average home loan declined by 7.71 per cent to $357,200 over the three months to February 29, according to consumer advocacy website finder.com.au.
This includes a fall of more than four per cent in February alone.
Loan sizes fell in every surveyed state and territory, with the sharpest drop in NSW, where the average dropped by a record 10.15 per cent.
Only the ACT was not surveyed.
The national quarterly decline was the most severe since May-July 2000, according to Bessie Hassan from finder.com.au.
Ms Hassan said it was the first time the average loan size dropped by more than one per cent in three consecutive months, with the trends indicating pressure on the market.
She said APRA lending regulations compelling Australia's major banks to hold more capital were slowing the growth in mortgage lending.
"It is showing up a cooling property market, and also the impact of tougher bank lending policies that were introduced mid-last year," Ms Hassan said.
"We're seeing banks scrutinising loan applications more closely and taking a tougher line when they're assessing borrowers' incomes."
IG market strategist Evan Lucas said the banks' net interest margins had fallen dramatically in the past three years as they competed on price for loans with high deposits.
"That has always been the biggest concern, that competition is creating really cheap loan prices," he said.
"That's good for you and me as consumers of a home loan, but it also therefore narrows bank earnings."
That could squeeze shareholder dividends.
"That has already been present in something like NAB, who hasn't actually increased its dividend now for the past three halves," Mr Lucas said.
"Westpac and ANZ have slowed to a dividend growth of only one cent, and CBA, for example, has only grown its dividend by three cents."