The federal government, industry analysts and the Reserve Bank have weighed in on the impact of the recent slowdown in credit growth and weakness in the housing market. In his address to the Chamber of Commerce, Treasurer Scott Morrison claimed that the Australian Prudential Regulation Authority's (APRA) caps on investor and interest-only credit growth had the "desired effect" of "managing" house price growth, particularly in Sydney and Melbourne.

"The heat in the housing markets in Sydney and Melbourne was causing some real difficulty," Mr Morrison said.

"We had double-digit dwelling price growth there. We had interest-only loans as a percentage of new loans well up over 40 per cent. At one stage, they ticked close to 50 per cent.

"Eighty per cent of household debt is mortgage debt and the level of household debt in Australia is at high levels.

"The government, through APRA, took some action and that was to restrict access to interest-only loans. There was also a credit speed limit put on new investor credit, and that has had the desired effect of bringing Sydney and Melbourne housing markets back to more normal transmission."

The CEO of the major aggregator AFG has said that regulation and tighter credit conditions have created a "new normal" where "upgraders" have become the largest proportion of the market and fewer people are investing or refinancing.

The head of the major aggregation group made the comments following the release of AFG's latest Mortgage Index, which includes stats for the final quarter of the 2018 financial year.

According to the report, the loans lodged by AFG brokers were showing a new trend in FY18: a growing proportion of people are taking out loans to "upgrade" to more expensive/larger housing, fewer people are taking out loans to invest in property or refinance and a record number are choosing principal and interest loans (P&I).

Specifically, the report shows that over the 2018 financial year, nearly 43 per cent of all mortgages lodged through AFG brokers in Australia were for those upgrading while just over 28 per cent were for those looking to invest.

This marks a step-change in the usual trends for loans lodged through the aggregator, being a record high for the upgraders and a record low for investors.

Indeed, it marks the first time in five years that the proportion of investor loans written in a financial year has dropped below 30 per cent.