Finding it harder to get a loan? Here's why

It's harder to get a loan in Australia right now than it has been in years.

The big banks have been whacked by the financial services royal commission and the media for lax lending standards. And it seems they're taking note.

Figures from the Australian Prudential Regulation Authority show growth in new loans is slowing from 6.6 per cent about a year ago, to 5.8 per cent earlier this year.

That is because of a few factors, including a crackdown on investor loans, a move away from high-risk loans, and increased paperwork checks for all borrowers.

In practice, it means some would-be buyers are struggling to get finance.

'It's like I've got a criminal record'

Paula Mills runs the Academy of Entrepreneurs in Sydney.

She has a full-time staff of 15 and hundreds of thousands of dollars in the bank.

She said even though her financial situation is "very healthy", she can't get a bank to extend her home loan.

"It's very frustrating. The first time I applied for a loan I was probably earning a quarter of what I'm earning now and they approved it in a few days," she said.

"This time, we've been going back and forth for two months and I've been to six to eight banks.

"The amount of paperwork is just ridiculous. It's so invasive, it's like I've got a criminal record."

'Absolutely there's a credit crunch', says real estate institute

Real estate agents around the country are seeing the impact of the credit crackdown at quiet auctions and open homes.

"Absolutely there's a credit crunch across the country," Malcolm Gunning, the president of the Real Estate Institute of Australia, said.

"The royal commission has really uncovered a few problems in the lending policies of the banks, so the banks have reacted and taken a more conservative approach."

As buyers struggle to get finance, it's driving prices down, he said.

"We're going to see a price drop in Sydney and Melbourne, circa 10 per cent at this stage, and it could go a little further south."

Crash talk 'alarmist', says NAB

But the National Australia Bank's chief economist, Alan Oster, dismissed talk of a sharp fall in house prices.

In advice released last week, he forecast the peak-to-trough fall would be 6.5 per cent in Sydney and 2.5 per cent in Melbourne.

"I think it's alarmist to say you're going to have a crash in house prices," he said.

Mr Oster said the cooling of the market was being driven by regulatory changes that cap investor loans, and also by tighter checks on borrowers.

"I think one of the issues people are worried about is how much the banks have really understood your income and ability to pay back a loan," he said.

"So banks will now say, 'Right, we really do want to see a copy of your pay slip, we're not just going to use an automatic system'."

He said the type of person who can borrow money was also changing, thanks to a regulatory crackdown.

"The investor market is down, and the owner-occupier is up, so there's been a switch."