The weakest home lending recorded since July 1984 is partly caused by investors who have switched from interest-only mortgages to principal-and-interest loans, according to a report by Australian Financial Review.

Data from the Reserve Bank of Australia showed that housing credit rose 0.2% in January. Year-over-year, it grew only 4.4%, making it the slowest annual rate of growth since 2013.

Cameron Kusher, CoreLogic research analyst, said that the credit growth in January was worse than any time during the early 1990s recession.

"A key contributor to slowing credit growth is that many investors have switched from interest-only mortgages to principal-and-interest," Kusher said in a statement.

Low rate terms on interest-only loans are expiring and approximately 650,000 borrowers with loans worth a total of about $230 billion might find it difficult to refinance, according to investment banking firm Morgan Stanley.

"Previously, these borrowers weren't paying off the principal on their mortgage. Now that they are, coupled with far less investor mortgage demand, they are paying back their principal and fewer new investor mortgage applications are occurring, which in turn contributes to the ongoing slowing of investor credit growth,” Kusher said in a statement.

In addition, Kusher said that the banking royal commission was a clear cause of the slowed lending in the country. Apart from the two factors mentioned by the research analyst, it was found that new lending was tracking downwards due to the weakening demand for credit.

“[Slowing demand credit] is a natural response to buyer expectations that dwelling prices will continue to adjust downwards,” said Commonwealth Bank economist Gareth Aird.