Ray White's Nerida Conisbee says arrears stay contained despite rising strain
Australian mortgage holders are changing how they manage their loans rather than falling behind on repayments, according to Ray White chief economist Nerida Conisbee (pictured), as interest-only lending reaches its highest share since the Australian Prudential Regulation Authority (APRA) began its current series in 2019.
Interest-only loans made up 23.5% of new housing lending in the June quarter of 2026, and lenders are approving more loans outside their standard serviceability rules. Yet arrears remain contained, Conisbee wrote in an analysis of the APRA figures published on LinkedIn.
"For now, the picture is one of adjustment rather than distress," Conisbee said.
Arrears and buffers hold
Arrears have barely moved. Non-performing housing loans were 1.01% of outstanding housing credit in June, marginally above March's 0.99% but below a revised 1.04% a year earlier, according to APRA's quarterly property exposures statistics for June 2026. Earlier-stage arrears have also eased, with loans 30 to 89 days past due falling to 0.54% from 0.66% a year earlier.
Borrowers also have plenty in reserve. Offset balances stood at around $340 billion, equal to 13.3% of the $2.56 trillion in outstanding housing credit. That's still well above levels earlier this decade.
One risk marker did rise. Low-deposit owner-occupier loans reached a record 4.31% of new lending, Australian Broker reported.
Why borrowers are restructuring
The interest-only share has climbed from 20.5% at the end of 2024. Property investors remain the heaviest users of these loans, but Conisbee pointed to a notable shift among owner-occupiers.
Outstanding owner-occupier interest-only debt has grown from $45.8 billion in June 2025 to $51.5 billion, a rise of about 13%. That's its highest level since December 2021, when it stood at $52.2 billion. Dropping principal repayments cuts the monthly bill, and Conisbee said the rise suggests more households are trying to ease cash flow while mortgage rates stay elevated.
Serviceability exceptions are loans approved outside a lender's usual borrowing capacity test. They reached 5.8% of new lending in the quarter, up from 4.6% at the end of 2024. That's well above the 2–3% range that was typical before late 2023. Loans approved as serviceability exceptions totalled $11.6 billion, up almost 400% on pre-pandemic levels.
APRA kept its 3% serviceability buffer and debt-to-income limits unchanged in May 2026, so borrowers are still assessed at 3 percentage points above their loan rate. Conisbee noted that an exception doesn't mean a loan is unaffordable. Some involve borrowers refinancing with a solid repayment record who no longer clear the standard assessment at today's higher rates.
What to watch
Pressure on borrowers has now increased, with the Reserve Bank (RBA) lifting the cash rate to 4.60% on 29 September. Writing before the decision, Conisbee said further rate rises would add to the strain. She flagged interest-only lending, serviceability exceptions, arrears, and offset balances as the key measures to monitor. In her view, the absence of widespread forced selling means owners can hold off listing in a weak market, which is likely to keep sales volumes low.
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