Investor home loan growth has almost come to a stop, rising just 0.3% in January 2016, a small increase over December 2015, and the lowest monthly levels since April 2011, according to data released by the Reserve Bank of Australia (RBA) today.

On a 12-month basis, loan growth was 7.9%, the lowest level in two years (February 2014).

As the chart below shows, investor housing credit growth has plummeted since mid-2015, after the banking regulator stepped in and instructed the big four banks to slow lending to investors from December 2014 to under 10% on a 12-month basis. Lending to investors peaked at 11% in May 2015, despite the Australian Prudential Regulation Authority (APRA) speed limit – forcing the regulator to step in and enforce the rules.

investor housing credit growth by month 2009 to 2016

Source: RBA data

Also hit by rising capital requirements Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) implemented a number of changes for investors’ loans, including higher loan-to-valuation ratios (LVRs), increased interest rates, and imposed lower limits on the amount they could borrow.

Interestingly, the RBA also notes that since higher interest rates were introduced for investors, $35.3 billion of loans switched their purpose from investor to owner-occupier, including $1.4 billion in January 2016. Are these investors living in their investment property who were stung by the higher rates, a glitch in the banks’ data or something else?

Whatever the reason, investors are leaving the property market in droves, although owner-occupiers switching homes and home loans are picking up some of the slack. In February, CBA reported that it was seeing weak demand for loans from investors, suggesting investor housing credit growth is likely to fall further.

Monthly investor lending has only turned negative twice since 1990 according to RBA data. Once in August 1991 – during the 1991/92 recession and the second time in February 2009 – at the height of the global financial crisis.

Foolish takeaway

Auction clearance rates have reportedly picked up in 2016, after falling to their lowest levels since 2012 in the December 2015 quarter, and there was a small uptick in investor lending in January 2016. But investors might still find it tough, given very low rental growth.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.