Investor lending sparks property bubble debate

The value of investment loan approvals has surged 35% in the quarter to $27.8 billion, making it the fastest growing category of property lending reports the Brisbane Times.

The rise in investor lending has sparked debate about the risk of an Australian property bubble led by speculative investors, as auction clearance rates in Sydney and Melbourne continue to climb.

According to JPMorgan economist Tom Kennedy rising house prices and falling interest rates are attractive for investors.

"They can get better returns and they can service the debt more cheaply," he said.

Investors are also spurred into housing due to the current low returns from bank deposits. Term deposit rates have plummeted since the RBA began cutting rates and investors need to be earning over 3.5% to break even once tax and inflation are accounted for.

Home loan interest rates are at their lowest in 50 years with variable rates starting at 4.62%. To compare home loans rates on investment loan head to financial comparison site Mozo.