Borrowers show resilience as mortgage trends shift

Mortgage borrowers appear to be coping well with their debt commitments, despite economic uncertainty and changing lending conditions.

Cotality's latest analysis of mortgage lending trends shows interest-only borrowing is running at its lowest level in more than a decade. While this could reflect changes in either lender appetite or borrower demand, it also suggests households generally aren't turning to interest-only loans to relieve cash flow pressure.

Repayment problems also remain low. Just 0.6% of the value of outstanding home loans is classified as non-performing – either at least 90 days overdue or considered impaired by the lender. That's around half the level recorded after the Global Financial Crisis.

First home buyers embrace low-deposit lending

Loan-to-value ratio (LVR) restrictions don't appear to be significantly constraining lending either.

In June, around 16% of owner-occupier lending went to borrowers with deposits below 20%, comfortably beneath the regulatory cap of 25%.

First home buyers, however, are making extensive use of low-deposit loans. They accounted for around 70% of high-LVR lending in June, while 55% of all first home buyer loans involved deposits below 20%.

For borrowers who are struggling to secure finance, Cotality said banks' own serviceability tests may be more important than official lending restrictions. Only around 10% of recent lending has been at high debt-to-income ratios, after exemptions, compared with the 20% limit.

Borrowers fix for longer

Another notable trend is the move towards longer fixed terms. More than half of new loans have been fixed beyond 12 months during the past five months, compared with less than 10% in late 2024. Two-year terms have proved particularly popular as borrowers seek greater certainty amid inflation and economic uncertainty.

Meanwhile, many existing borrowers still have opportunities to shop around, with 10% of current loans floating and another 30% due to reprice within six months.

Whether you're refixing, refinancing or applying for a new mortgage, understanding the lending landscape can help you make better-informed decisions. Get in touch and we can explore the home loan strategy that best suits your circumstances.