Australian mortgage lending surged in the December quarter to reach new record highs on the eve of the RBA's February rate hike. The value of new commitments rose by 9.5% in the quarter ($108.3bn), underpinned by a 5.1% rise in loan volumes (149.4k). Key factors supporting demand included the RBA's easing cycle (75bps in 2025), first home-buyer incentives, and population growth - all reflected in housing prices that rose in the order of 8-9% on a nationwide basis in 2025 according to Cotality.
Activity in the domestic mortgage market was very strong through the back half of last year - strength that has caught the attention of the RBA and APRA through earlier measures to curb riskier lending. Lending ended the year at a record high of $108.3bn on the back of a 9.5% rise in the December quarter, increasing by 21.5% across the back half of the year - compared to growth of just 1.5% in the first half. The acceleration looks to reflect the RBA's 3 rate cuts (75bps total), and expanded measures by the federal government to help buyers with low deposits enter the housing market.
Accordingly, first home-buyer lending surged by 15.5% in the quarter - the strongest rise since the Covid period - to $19.3bn, just short of the record high from 2021. But loan volumes to the segment, despite lifting 6.8% in the quarter to 31.8k, were still more than a third (34%) below the Covid peak - a combination of factors that point to affordability pressures. According to today's release, the average loan written to first home buyers was around $608k as of the December quarter.
Lending to the two major segments - owner-occupiers and investors - was at record highs. Owner-occupier lending was up 10.6% for the quarter - its fastest gain since Q1 2021 - to $65.3bn. That was matched by 4.8% lift in underlying loan volumes to 89k. In the investor segment, lending rose by 7.9% across the quarter ($43bn) and there was a 5.5% increase in loans written (60.4k).
