Australia's Mortgage Market: Record Lending, Strained Supply
Australia's mortgage market has reached an unprecedented peak, with lending surpassing $100 billion in a single quarter for the first time, hitting over $115 billion in the December 2025 quarter. However, a closer look reveals a complex landscape driven by rising prices and a concerning lack of new housing supply.
This record surge is primarily fueled by escalating property prices, leading to significantly larger average loan sizes for both owner-occupiers and investors. Investor activity remains robust, now accounting for a record 39% of the mortgage market, with loan numbers growing three times faster than owner-occupiers. Additionally, the Federal Government's 5% Deposit Guarantee Scheme has bolstered first-home buyer activity, with loans expected to increase by 11% this year.
Crucially, this demand surge is overwhelmingly directed towards existing properties. Lending for new dwelling construction, conversely, continues to decline, with owner-occupier new build loans down 9% and investor new build loans down 4% over the past year. This exacerbates the current housing supply deficit, as the construction pipeline remains well below capacity.
Amidst these shifts, refinancing activity also hit record highs in 2025, suggesting homeowners are actively seeking better deals in a dynamic interest rate environment.
The takeaway is clear: more capital is chasing fewer newly built homes. This imbalance - record mortgage lending predominantly for existing stock, coupled with a shrinking new construction pipeline - will continue to exert upward pressure on property prices and rents.
KEY POINTS
Record Lending Explodes
Mortgage lending shattered the $100 billion mark in a single quarter for the first time, fueled by soaring property prices pushing average loan sizes ever higher.
Investor Surge
Investors now command a record 39% of the mortgage market, with their loan numbers jumping 12% in 2025 – three times faster than owner-occupiers.
FHB Boost (But Watch Out)
The 5% Deposit Guarantee Scheme has energized first-home buyer activity, with loans forecast to rise 11% this year. However, rising prices and potential rate hikes could limit these gains.
For stakeholders and participants in the Australian property market, understanding these underlying dynamics is paramount for strategic decision-making. "
