Mortgage arrears and interest-only lending also on the rise
New APRA data shows low deposit lending has reached a fresh record, with owner-occupier loans written with a 5% deposit or less accounting for 4.31% of all new lending in the June quarter.
Since the government uncapped its Home Guarantee Scheme in October 2025, a total of $15.6 billion in low deposit loans have been written – lending Canstar says is increasingly exposed given the timing, with property prices sliding across much of the country.
"The number of borrowers getting into the property market with barely any skin in the game has surged yet again, at the same time the housing market is shifting into reverse," Canstar data insights director Sally Tindall said.
That risk is no longer theoretical: separate Cotality analysis found one in two homes purchased in Sydney and Melbourne over the past year would now sell for less than their purchase price, with dwelling values down 7.7% in Sydney and 6.9% in Melbourne from their April peak.
Offset balances plunge, but that's largely a June story
Money held in offset accounts fell by $8.6 billion in the June quarter – the largest quarterly drop on record in dollar terms – though this pattern is typical of EOFY spending rather than necessarily a sign of distress. Offset balances still sit near record highs overall, at $340.5 billion, up 12.8% on a year earlier.
Arrears rising for a second straight quarter
Mortgages in arrears by 90 days or more now total $25.9 billion, or 1.01% of all mortgages – above the historical average of 0.93% since 2019, and the second consecutive quarterly rise. Loans 30 to 89 days past due also increased for a second straight quarter, to 0.54% of all credit outstanding. The increases follow three cash rate hikes so far this year, with borrowers under mounting repayment pressure.
Interest-only lending and refinancing both climb
Interest-only lending also rose, accounting for 24% of new mortgages in the June quarter, up from 21% a year earlier, though still well below the 46% peak recorded in 2015 that prompted APRA to intervene. Separately, refinancing processed as an exception to standard serviceability tests reached $11.6 billion, or 5.8% of all new lending – also a record, and up almost 400% since before the pandemic.
Taken together, the data points to a widening gap between borrowers with thin buffers and those still building them: clients who entered the market recently with minimal deposits, or who are relying on interest-only terms, may need closer attention to repayment capacity as rate pressure continues, particularly with another cash rate rise still considered likely before year's end.
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