The Australian mortgage market cooled in early 2025 despite the March quarter seeing the first RBA rate cut since the pandemic. Both the value of lending (-1.6%) and loan volumes (-3.5%) contracted in the March quarter, posting their largest declines in 2 years. The weakness was driven by the owner-occupier segment, but investor activity also softened.
The total value of lending commitments fell by 1.6% in the March quarter to $85.6bn, the sharpest decline in the series since Q1 2023. Despite this, commitments still rose by 14.2% over the year. A sharp slowing occurred in the mortgage market following the RBA's tightening cycle from May 2022 onwards, with activity troughing in early 2023. Activity has been rebounding over the past couple of years, but it was a slow start to 2025 despite a widely anticipated RBA rate cut.
In the latest quarter, commitments to the owner-occupier segment were down 2.5% to $53.2bn (13.1%yr), with upgraders falling by 2.6% ($37.2bn) and first home buyers contracting by 3.2% ($15.4bn). Meanwhile, investor commitments were 0.3% lower at $32.4bn.
In terms of volumes, the total number of loans written fell by 3.5% across the quarter to 127.2k, backsliding to levels seen around 12 months earlier. Within this, loan volumes fell in the owner-occupier segment by 3.4% to 79.9k, and by 3.7% to 47.2k for investors. Although this implies investor activity remains elevated, it is a different story for owner-occupiers where loan volumes are in line with pre-pandemic levels. Upgraders saw a 3.8% fall (50.8k) with first home buyers down 4.2%, bringing volumes back to early 2024 levels.
