Share and Follow
In Brief
- New data shows mortgage and credit card applications are surging, with home loan applications at five-year highs.
- Generation Z are fuelling the highest growth in credit card applications in three years.
One might think that the anticipation of rising interest rates would lead individuals to curb their spending and shy away from taking on new debt. However, in Australia, the opposite trend is unfolding.
Recent figures reveal a spike in mortgage and credit card applications in the months preceding the Reserve Bank’s first rate increase in two years. This suggests that many Australians rushed to secure financing before costs could escalate further.
According to the Market Pulse report from Equifax, a consumer credit reporting agency, the demand for mortgage credit experienced a 12.3 percent increase in the three months leading up to December, compared to the same timeframe in 2024.
Credit card applications saw an even steeper rise, soaring by over 15 percent during the same quarter.
Despite efforts to secure financing ahead of time, these measures do not entirely protect consumers from cash rate hikes. These increases still affect interest rates on credit cards and variable mortgages, which are currently the most prevalent choices for new loans.
The biggest increase in five years
The significant increase in mortgage applications was at a level not seen in five years, Equifax chief solution officer Kevin James said.
“It’s likely to have been supercharged by the government’s expanded five per cent First Home Buyer Deposit Scheme that became available in October 2025, and buyers acting on the impression that rates had peaked in late 2025, and therefore rushed to lock in deals before the year’s end.
“If this was their driver, they may have secured the last of the lower rates for a while, following the 25-basis point increase confirmed this February.”
Arrears steady — but debts are bigger
While the number of Australians falling behind on home loan repayments remained steady, the amount they owe is rising.
The dollar value of mortgage arrears increased 6.8 per cent compared with the same quarter in 2024.
The average amount owed on a loan at the late stage of delinquency jumped more than eight per cent to $403,000, correlating with higher house prices, potentially forcing buyers into larger loans with steep repayment penalties.
“This pattern of older Australians (aged 66 and over) carrying this type of debt into retirement is something to keep an eye on, particularly if the rate environment continues to increase,” James said.
In other credit segments, unsecured credit demand jumped 5.9 per cent, personal loan applications increased 8.9 per cent, while vehicle and auto loans fell 5.4 per cent compared with the 2024 quarter.
Gen X and gen Z driving the surge
Generation X borrowers (aged 46 to 55) drove the growth in mortgage demand.
Meanwhile, generation Z (18 to 30-year-olds) fuelled the spike in credit card applications with a 23.2 per cent surge — the highest growth rate for that cohort in three years.
The uptick was likely underpinned by aggressive incentive campaigns pushed by card providers in the recent quarter.
The younger borrowers subsequently helped drive a 28.8 per cent surge in credit card arrears.
But despite the surge in demand, lenders appear to be taking a more cautious approach.
Credit card limits for new customers have dropped by an average 8.3 per cent year-on-year, while personal loan limits are down 3.9 per cent.
“This proactive reduction appears to represent responsible lending in action, as banks prioritise stability over high-risk growth,” James said.
In terms of personal loans, slightly fewer people were falling into trouble, with delinquency rates easing 0.08 per cent, but those who did were falling deeper.
“While the number of people falling behind on personal loans has actually dropped, the amount of money they owe has significantly increased,” James said.
The Reserve Bank of Australia lifted interest rates in February for the first time in two years, setting the scene for lenders to bump up their offerings in line with the increase.
The bank is expected to raise rates again as early as May.
For the latest from SBS News, download our app and subscribe to our newsletter.