Business lending outpaces mortgage growth as CEO Matt Comyn warns higher rates and cost-of-living pressures 'continuing to impact customers unevenly'
Home loan applications at Commonwealth Bank of Australia (CBA) have fallen sharply, in a sign that higher interest rates and cost-of-living pressures are cooling demand at the country’s largest mortgage lender.
CBA’s home loan application volumes were 16% lower in the September 2026 quarter than a year earlier, according to the bank’s 1Q27 trading update released today. The figure covers both CBA and Bankwest.
The slowdown builds on a trend CBA flagged at its full-year result in August. The bank said then that application volumes had fallen year-on-year, with investor applications dropping more sharply than owner-occupier ones, and linked the decline to the cumulative effect of interest rate rises.
“With higher interest rates and cost-of-living pressures continuing to impact customers unevenly, we remain focused on supporting our customers,” said CBA chief executive Matt Comyn.
Book still growing
Fewer applications have not yet stalled CBA’s mortgage book. The bank wrote $44 billion in new home loan funding during the quarter. Its home loan book grew $39.8 billion, or 6.6%, over the 12 months to September 2026, about 1.1 times system growth.
Net interest income rose 4% in the quarter, helped by lending and deposit growth, earnings on the bank’s interest rate hedging portfolio and the quarter having 1.5 more days.
Lending competition and a shift towards lower-margin deposits partly offset those gains. Excluding movements in liquid assets, CBA said its underlying net interest margin was broadly stable.
Unaudited cash profit was about $2.8 billion for the quarter. That was flat on the second-half FY26 quarterly average and up 8% on the same quarter a year earlier.
Brokers win a bigger slice
Proprietary channels accounted for 62% of new home loan flows in the quarter, excluding Bankwest and the Residential Mortgage Group. That leaves brokers writing about 38% of CBA-branded new lending.
Broker-originated loans had already risen from 33% of CBA’s new fundings in the first half of FY26 to 36% in the second half, according to the bank’s FY26 results pack. The shift has come despite CBA’s long-held view that its own channel is more profitable.
The bank maintains that proprietary-originated home loans are 20–30% more profitable than broker-written loans once commissions and lower operating costs are counted. CBA’s third-party banking chief Baber Zaka has nonetheless reiterated CBA’s commitment to the broker channel.
Across its Big Four peers, NAB now writes half of its new home loans through its own bankers, while Westpac lifted its proprietary share of new home loans to 36% in its full-year result.
Arrears rise as house prices fall
Borrowers are feeling the strain. CBA’s 90-plus-day home loan arrears rose seven basis points in the quarter to 0.80%. The bank pointed to cost-of-living pressures from higher inflation and interest rates. It added that slower resolution of cases, after earlier pauses in late-stage collections activity, also pushed the figure up.
Loan impairment expense was $300 million, or 11 basis points of average gross loans and acceptances. Collective provisions rose $105 million, mainly reflecting the impact of lower house prices on the mortgage book.
“Higher inflation and interest rates continue to place uneven pressure on household incomes and business activity,” Comyn said.
“While economic growth is slowing, the Australian economy remains resilient, supported by low unemployment and a strong public infrastructure and private investment pipeline.”
The update follows the RBA lifting the cash rate to 4.85%, its highest since 2008.
Business lending outpaces mortgages
Business lending is growing more than twice as fast as home lending at CBA. The bank’s business lending book grew $24.6 billion, or 13.6%, over the 12 months to September 2026, about 1.3 times system growth. Those figures exclude the bank’s Institutional Banking and Markets division.
Comyn said the growth was spread across industries.
“Business lending growth was well-diversified across a range of sectors, supported by the strength of our proprietary customer relationships and continued business investment demand,” he said.
CBA has built that book largely through its own bankers, tying lending to everyday transaction banking. Business transaction accounts rose 6% on a year earlier. CBA said these deeper customer relationships helped it keep growing business lending above system.
Commercial loans are also driving most of CBA’s credit risk growth. The bank’s credit risk-weighted assets rose $8.1 billion in the quarter, mainly because of lending growth across its commercial portfolios and domestic residential mortgages.
Corporate credit quality has softened slightly. Troublesome and non-performing corporate exposures rose to $6.9 billion, or 1% of total committed exposures. CBA said non-performing exposures increased $0.2 billion after a small number of individual borrowers were downgraded, partly offset by a $0.1 billion fall in troublesome exposures.
