APRA flags surge in 5% deposit loans as first-home buyers borrow more
Banks wrote a record $5.4 billion of owner-occupier mortgages with deposits of 5% or less in the December quarter, after the uncapping of the federal government’s Home Guarantee Scheme.
APRA said the value of these loans rose by $2.1 billion, or 63% in the quarter, the largest jump in the series since the dataset began in 2019. Low-deposit lending represented 4% of new owner-occupier mortgages, a record share.
Source: APRA Quarterly ADI Property Exposure statistics
Total new home lending reached $211.9 billion in the quarter. Owner-occupier lending rose 12.1%, while investor lending was 25% higher than a year earlier.
| Value of new loans funded December 2025 quarter | ||
|---|---|---|
| Dec 25 quarter | Change from previous quarter | Change from Dec 24 quarter |
| $134.1 billion - record high | +$14.5 billion (+12.1%) | +$20.4 billion (+17.9%) |
| $77.8 billion - record high | +$6.3 billion (+8.9%) | +$16.0 billion (+25.9%) |
| Source: APRA Quarterly ADI Property Exposure statistics | ||
“The Home Guarantee scheme has removed a key barrier for first-home buyers who have surged on to the market, wafer-thin deposits in hand,” said Sally Tindall (pictured right), data insights director at Canstar.com.au.
“Saving a 20% deposit had become an almost impossible task for many would-be buyers. This latest APRA data confirms new borrowers are now jumping at the option of a 5% deposit loan.
“These loans now make up 4% of new owner-occupier lending, which sounds small, but is actually the highest proportion on record. This won’t have passed the regulator by.”
The APRA data also revealed that borrowers continued to build offset buffers. Offset balances rose to $343.5 billion, up $16.2 billion in three months, and accounted for 12.3% of credit limits across lenders’ mortgage books, up from 11.9% in the September quarter.
“Australians are continuing to stash large sums in their offset accounts, with balances hitting a record $343.5 billion,” Tindall said.
“For mortgage holders who can afford it, parking spare cash in an offset is one of the most effective ways to cut interest costs while building a financial buffer. It helps soften the blow of last month’s rate hike and put households in a stronger position if the two additional hikes banks are forecasting materialise.”
Higher-risk lending also increased. New loans with debt-to-income ratios of six times or more rose by $2.8 billion in the quarter and made up 6.8% of new lending. APRA’s cap on high DTI lending, announced in November, took effect on 1 February.
“Borrowers piled into the property market in the December quarter, with a record $211.9 billion worth of new home loans written in just three months,” Tindall said.
“While owner-occupiers dominated in this quarter, over the year, investors posted the biggest growth, with the value of new investor loans 25 per cent higher than the same quarter a year ago.
“This staggering growth in investor lending has caught the eye of the regulator, as has the rise in loans with a debt-to-income ratio of six times or more, with APRA introducing a new limit on these mortgages. This new cap only kicked in on 1 February, so the real test will be whether investor activity starts to cool in the next set of data.”
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