Burgeoning Australian Housing Loans: Banks Reap the Benefits
The banking sector in Australia is witnessing a prosperous period, with a staggering $719 billion in new housing loans recorded in the year leading up to September 2025. This data is available in the latest Quarterly ADI Property Exposures publication released by the Australian Prudential Regulation Authority (APRA) Here.
Owner-Occupied and Broker Loans Dominate the Landscape
Delving deeper into the composition of these new loans, it becomes evident that owner-occupied loans have a significant share, accounting for 63 per cent of the new lending flows. This highlights a surge in individuals buying properties for their personal use rather than for investment purposes.
A parallel trend is observed in the prevalence of third-party originated, or broker, loans. These represent another 63 per cent of the new lending flows. Interestingly, this estimate is slightly lower than the figures compiled by the Mortgage and Finance Association of Australia, indicating a potential discrepancy in data collection methods or sample sizes.
Loans with High Debt-to-Income Ratios: A Growing Concern
The publication also sheds light on a worrisome trend: the growth in the number of new home loans with a debt-to-income ratio of 6 times or greater. This figure rose from $31.9 billion over the year to September 2024 to $39.7 billion over the corresponding period in 2025.
Loans in this category are eliciting particular concern from APRA. High debt-to-income ratios signify borrowers with high levels of debt relative to their income, implying a higher risk of default. In response to this growing risk, APRA recently imposed a 20 per cent cap on new loans with a debt-to-income ratio of 6 times or more.
Mitigating Financial Risks: APRA’s Proactive Measures
The imposition of this cap by APRA is a proactive step towards mitigating financial risks associated with high debt-to-income loans. It serves as a prudent measure to safeguard the financial stability of both borrowers and lenders. With the housing market heating up, such regulatory interventions are crucial to maintain a balanced and sustainable lending environment.
In conclusion, the Australian banking sector is experiencing a boom in new housing loans. However, with the rising trend of high debt-to-income loans, it is essential for regulatory authorities like APRA to continue monitoring these developments and implementing necessary measures to ensure the sector’s stability and growth.
