Australian mortgage market

The **Australian mortgage market** comprises the origination, servicing and funding of loans secured by residential property in Australia. It serves people buying or refinancing homes and investors buying residential property. Banks and other authorised deposit-taking institutions (ADIs) hold most mortgage credit, while non-bank lenders also participate. The market is significant to household finances and bank balance sheets.^[1][2] ([apra.gov.au](https://www.apra.gov.au/quarterly-authorised-deposit-taking-institution-property-exposure-statistics-june-2026-highlights))

Size and participants

At June 2026, ADIs reported A$2,558.5 billion in residential property credit outstanding, up 7.0% from June 2025. Owner-occupied loans accounted for 66.7% of the reported outstanding exposure and investment loans for 31.2%. During the June 2026 quarter, ADIs funded A$200.5 billion in new residential loans; the owner-occupied and investment shares of that new lending were 61.9% and 35.6%, respectively. These are **ADI statistics**, not a measure of every mortgage held by banks and non-bank lenders together. The reported categories should not be treated as an exhaustive classification of all outstanding credit.^[1] ([apra.gov.au](https://www.apra.gov.au/quarterly-authorised-deposit-taking-institution-property-exposure-statistics-june-2026-highlights))

The four large banks—Commonwealth Bank of Australia, Westpac Banking Corporation, National Australia Bank and Australia and New Zealand Banking Group—are participants alongside other banks, mutual ADIs and non-bank lenders. Residential mortgages represented around two-thirds of Australian banks’ domestic lending in the Reserve Bank of Australia’s 2024 assessment. That concentration makes the performance of housing loans relevant to both individual lenders and financial-system stability.^[2] ([rba.gov.au](https://www.rba.gov.au/publications/bulletin/2024/jul/how-the-rba-uses-the-securitisation-dataset-to-assess-financial-stability-risks-from-mortgage-lending.html))

Non-bank lenders differ from deposit-taking institutions in their funding. They cannot raise deposits and rely substantially on market-based finance, including securitisation. The RBA estimated in 2024 that residential mortgage-backed securities supplied about three-quarters of Australian non-bank mortgage lenders’ funding. Its assessment also noted that securitisation had supported a broader range of lenders and borrowers, while potentially exposing lenders to changes in investor demand and market conditions.^[3] ([rba.gov.au](https://www.rba.gov.au/speeches/2024/sp-so-2024-12-02.html))

Borrowers and loan structures

The market distinguishes lending to **owner-occupiers**, who intend to live in the property, from lending to **investors**, who acquire residential property as an investment. It also distinguishes a loan’s purpose from its repayment structure. Under a principal-and-interest loan, regular payments cover interest and reduce the amount borrowed over the agreed term. Under an interest-only loan, payments initially cover interest without reducing principal; payments can increase when that period ends. A common example of a contractual loan term is 30 years, although terms vary.^[4] ([moneysmart.gov.au](https://moneysmart.gov.au/home-loans/choosing-a-home-loan))

Interest rates may be variable, fixed for a specified period, or divided between fixed and variable portions in a split loan. A variable rate can change over time at the lender’s discretion. A fixed rate generally leaves the rate unchanged during its fixed period, commonly one to five years, but does not fix it for the entire life of a longer mortgage. Loan products can differ in fees, repayment flexibility and attached account features as well as in their stated interest rates.^[4] ([moneysmart.gov.au](https://moneysmart.gov.au/home-loans/choosing-a-home-loan))

One distinctive feature is the **offset account**, a transaction account linked to a mortgage, generally one with a variable rate. Its balance reduces the loan amount on which interest is calculated; it does not itself repay the principal. A redraw facility instead gives a borrower access, subject to the loan’s terms, to extra amounts previously paid into the mortgage. Offset features can carry higher account fees or loan rates, so their presence alone does not establish the overall cost of a loan.^[5] ([moneysmart.gov.au](https://moneysmart.gov.au/home-loans/mortgage-offset-accounts))

A borrower’s deposit and the property valuation determine the loan-to-valuation ratio (LVR): the loan amount expressed relative to the property’s value. **Lenders’ mortgage insurance** generally protects the credit provider, rather than the borrower, if the borrower cannot repay. It is usually a one-off cost to the borrower when the amount borrowed exceeds 80% of the property’s value, although a particular borrower’s arrangements can differ.^[6] ([moneysmart.gov.au](https://moneysmart.gov.au/glossary/lenders-mortgage-insurance-lmi))

Origination and consumer protection

A borrower may approach a lender directly or use a mortgage broker to seek a loan. The Australian Securities and Investments Commission regulates consumer-credit conduct. Its responsible-lending guidance explains obligations under the *National Consumer Credit Protection Act 2009*, while its mortgage-broker guidance addresses the statutory best-interests obligations applying to brokers and relevant credit licensees. Prudential supervision of ADI mortgage exposures is a separate function of the Australian Prudential Regulation Authority (APRA).^[7][8] ([asic.gov.au](https://asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/rg-209-credit-licensing-responsible-lending-conduct))

Brokers are an important distribution channel: ASIC stated in October 2026 that more than 80% of home loans were arranged through them. In a review published that month, ASIC found that brokers’ practices generally aligned with its guidance but identified scope to improve the evidence supporting loan recommendations, supervision and complaints handling. A broker recommendation, a lender’s credit decision and APRA’s assessment of system-wide lending risk are therefore distinct stages or perspectives within the market.^[9] ([asic.gov.au](https://asic.gov.au/about-asic/news-centre/find-a-media-release/2026-releases/26-240mr-asic-review-finds-room-for-improvement-in-mortgage-brokers-best-interests-duty-practices))

Lenders assess prospective borrowers’ ability to meet repayments, while also considering the property offered as security. APRA’s prudential settings for ADIs include a **mortgage serviceability buffer**: in its May 2026 review, APRA retained the buffer at three percentage points above the loan interest rate used in the assessment. This buffer is an assessment assumption intended to allow for changes in interest rates and expenses; it is not an additional three-percentage-point charge on the loan.^[10] ([apra.gov.au](https://www.apra.gov.au/news-and-publications/apra-maintains-current-macroprudential-policy-settings-highly-uncertain))

Prudential limits and risk measures

APRA also monitors how large new loans are relative to borrowers’ incomes. From 1 February 2026, its debt-to-income (DTI) limits permitted an ADI to fund up to 20% of its new investment loans at a DTI ratio of at least six, and separately up to 20% of its new owner-occupied loans at that threshold. These are portfolio limits on shares of an ADI’s new lending, **not a prohibition on every individual loan** at or above six times income. APRA confirmed in May 2026 that the limits remained in place.^[10][11] ([apra.gov.au](https://www.apra.gov.au/news-and-publications/activation-debt-income-limits-macroprudential-policy-tool))

For the June 2026 quarter, APRA reported that 5.6% of new ADI residential loans funded had a DTI ratio of at least six. The corresponding shares were 3.7% for new owner-occupied loans and 8.9% for new investment loans. It also reported that 29.7% of new loans funded had an LVR of at least 80%. On the outstanding ADI portfolio, 0.54% of loans were 30–89 days past due and 1.01% were classified as non-performing. Measures of new-loan risk and outstanding-loan performance describe different populations and should not be conflated.^[1] ([apra.gov.au](https://www.apra.gov.au/quarterly-authorised-deposit-taking-institution-property-exposure-statistics-june-2026-highlights))

The RBA’s October 2026 *Financial Stability Review* assessed household borrowers as broadly resilient and loan arrears as low, while noting increased financial pressure associated with inflation and interest rates. It also emphasised the need to maintain prudent standards amid competition between bank and non-bank lenders. Aggregate arrears figures can coexist with serious hardship for particular households; they do not describe every borrower’s circumstances.^[12] ([rba.gov.au](https://www.rba.gov.au/publications/fsr/2026/oct/resilience-of-australian-households-and-businesses.html))

Funding, interest rates and monetary policy

Banks fund mortgage portfolios through a combination of sources and set lending rates in light of funding costs, competition and loan characteristics. The Australian cash rate influences those costs and mortgage pricing but is not itself a contractual mortgage rate. RBA research published in May 2026 described bank funding costs and lending rates falling during 2025 as the cash rate was cut, then rising in early 2026 alongside cash-rate increases. The effect on an existing borrower depends in part on whether the loan has a variable or fixed rate and when any fixed period ends.^[13][4] ([rba.gov.au](https://www.rba.gov.au/publications/bulletin/2026/may/developments-in-banks-funding-costs-and-lending-rates.html))

Securitisation provides another funding channel: loans can be pooled to support securities sold to investors, including Australian mortgage-backed securities. The RBA uses loan-level information from securities in its securitisation dataset to assess mortgage risks. It cautions, however, that the dataset must be considered alongside other evidence, particularly when examining new lending or arrears, because securities-backed loan pools need not capture every feature of the wider mortgage market.^[2][3] ([rba.gov.au](https://www.rba.gov.au/publications/bulletin/2024/jul/how-the-rba-uses-the-securitisation-dataset-to-assess-financial-stability-risks-from-mortgage-lending.html))

Market statistics and interpretation

Different statistical releases answer different questions. APRA’s property-exposure figures describe ADIs’ outstanding mortgages, new loans funded and characteristics such as LVR, DTI and arrears. By contrast, the Australian Bureau of Statistics (ABS) *Lending indicators* measure new borrower-accepted finance commitments. The ABS’s dwelling-commitment series excludes refinancing; a commitment is also not the same measure as the stock of loans still outstanding.^[1][14] ([apra.gov.au](https://www.apra.gov.au/quarterly-authorised-deposit-taking-institution-property-exposure-statistics-june-2026-highlights))

In the June 2026 quarter, the ABS recorded 134,225 new dwelling-loan commitments in seasonally adjusted terms, down 5.4% from the preceding quarter. Their value was A$97.6 billion, down 5.2%. These quarterly movements in commitments should not be interpreted as equivalent changes in total mortgage debt. Together, ABS, APRA and RBA publications provide views of borrowing demand, lenders’ portfolios, loan pricing and financial-stability risks rather than a single interchangeable measure of the market.^[14][1][2] ([abs.gov.au](https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release))