New data has revealed that Australians rushed back into the home loan market late last year, pushing mortgage demand to its strongest pace since 2021.
Equifax’s latest Consumer Market Pulse for the December quarter of 2025 has revealed mortgage inquiries jumped 12.3 per cent year on year, capping a frenetic finish to the year in which households also leaned harder on credit cards and personal loans.
Released on Monday (23 February), the Q4 2025 snapshot from the credit bureau tracks consumer credit applications and arrears across the country, with chief solution officer Kevin James saying that home loan inquiries had reached a near five-year high.
“This is a significant increase in mortgage demand, and a level of activity we haven’t seen in nearly five years,” James said.
The Equifax data suggested borrowers moved decisively in the final months of 2025 to secure loans before interest rates climbed higher again.
James said the upswing was also “likely to have been supercharged” by the federal government’s expanded 5 per cent first home buyer Deposit Scheme, which became available from October, in addition to a widespread perception that rates had peaked.
According to James, many buyers “rushed to lock in deals before the year’s end."
“If this was their driver, they may have secured the last of the lower rates for a while, following the 25bps increase confirmed this February,” James said.
This behaviour fits a broader pattern seen through 2025, where policy support and shifting rate expectations pulled forward demand, with households attempting to protect their positions in an environment of stubbornly high living costs and elevated house prices.
Gen X and upgraders drive activity, while FHBs hold firm
Behind the headline growth, the Equifax data showed midlife borrowers and existing owners doing much of the heavy lifting.
Gen X borrowers (aged 46–55) recorded the strongest mortgage demand growth at 13.6 per cent year on year, while “upgraders” – households increasing their mortgage to trade up or fund major renovations – led loan purpose activity with a 16 per cent annual rise.
Yet first home buyers nonetheless remained a powerful force, with inquiries up 11.2 per cent compared with Q4 2024.
Refinancing demand also stayed elevated, rising 9.6 per cent, as existing borrowers continued to reshuffle their loans in search of sharper rates and more manageable repayments.
Geographically, momentum was strongest outside the most expensive markets.
Queensland led the country with 17 per cent year-on-year growth in mortgage demand, followed by Western Australia at 15 per cent and NSW at 13.5 per cent.
Within the first home buyer category, Gen Z borrowers (aged 18–30) were most active in Western Australia, where demand rose 16.3 per cent, and in Queensland, up 14.1 per cent – both states where prices are relatively accessible compared with Sydney and Melbourne.
Arrears stable in headcount, but deeper in dollars
While the volume of mortgage borrowers missing payments held steady over the year, Equifax warned that the severity of distress was increasing.
The total dollar value of mortgage arrears rose 6.8 per cent year on year in Q4, while the average loan size at the late stage of delinquency climbed 8.4 per cent, from $371,000 to $403,000.
“This increase in the dollar value of arrears debt for mortgages appears to correlate with higher house prices, potentially forcing buyers into larger loans that carry heavier repayment penalties,” James said.
The trend is most pronounced in Victoria, where arrears value jumped 16 per cent, and in NSW, up 10.5 per cent, mirroring the larger typical mortgage sizes in those states.
Older borrowers are also emerging as a key pressure point, with Baby Boomers (aged 66 and over) recording the fastest increase in arrears value, up 14.6 per cent over the year, ahead of Millennials and younger Gen Z borrowers, where arrears value rose 11.3 per cent.
“This pattern of older Australians (aged 66+) carrying this type of debt into retirement is something to keep an eye on, particularly if the rate environment continues to increase,” James said.
Gen Z rushes back to plastic credit as lenders cut limits
Alongside the mortgage rebound, unsecured credit demand climbed 5.9 per cent year on year, driven by a 15.5 per cent spike in credit card applications and an 8.9 per cent rise in personal loan demand, even as auto loan inquiries slipped by 5.4 per cent.
James said the most striking feature in the card data was a 23.2 per cent surge in demand from younger Gen Zs (aged 18–25) – the strongest growth in three years for the cohort.
“This is likely due to the wave of aggressive credit card incentive campaigns in the market during the past quarter,” he said.
Yet these same borrowers also drove a 28.8 per cent jump in card arrears, reinforcing signs that younger adults are increasingly leaning on revolving credit to manage everyday expenses.
In response, lenders appear to have quietly tightened the screws.
Equifax reported that the average limit on new credit cards fell 8.3 per cent year on year, while average limits for personal loans dropped 3.9 per cent.
“This proactive reduction appears to represent responsible lending in action, as banks prioritise stability over high-risk growth,” James said.
Personal loan arrears offered a more nuanced picture, with delinquency rates improving by around 8 basis points, while the total limits attached to accounts 90‑plus days behind jumped 10 per cent – a pattern James described as “fewer but deeper” cases of distress.
“While the number of people falling behind on personal loans has actually dropped, the amount of money they owe has significantly increased. Essentially, it seems that fewer people are in trouble, but those who are, are carrying much deeper debt,” he said.
[Related: IMF warns 5% Deposit Scheme risks fuelling prices]
