New lending commitments for investment dwellings recorded growth of 5.7% in August, according to the Australian Bureau of Statistics. This recent growth was faster than July's 4.2% jump and the most substantial month-on-month increase since September 2016.

The solid improvement in investment lending was driven by the strong showing in Queensland and Victoria, where loans to investors grew by 10.4% and 9.5%, respectively.

Despite the monthly uptick investor lending, its annual growth is still in the red at 13%.

"However, this is the smallest negative result in almost two years," ANZ analysts said in a note.

Housing Industry Association economist Tom Devitt said the rate cuts by the Reserve Bank of Australia (RBA), the income tax cuts, and the loosening of lending serviceability rules have supported the growth in investor lending.

"Given the lag between loan applications and final approval, it is likely that the full effects of recent stimulus is yet to play out in the data and will provide further support to the market as the year progresses," he said.

Overall, the value of new lending commitments to households rose 3.2%. Aside from investor loans, finance commitments from first-home buyers also contributed to the overall growth, clocking a 5.2% increase during the month.

CoreLogic head of research Tim Lawless said the increase in overall lending could be an indication of buyers and investors taking advantage of rate cuts and loosened mortgage rules.

"But to see investor finance commitments jump as much as what they have over the month – that's probably the biggest surprise. And I think another factor simply comes back to the fact that lenders are becoming more competitive for business from investors," he told The New Daily.