Despite higher rates, new data has shown that borrowers are still leaning into credit, with mortgage demand lifting as arrears edge lower.
Equifax’s Consumer Market Pulse for Q1 2026 has revealed that households are navigating cost‑of‑living pressures and recent cash rate hikes with surprising resilience, as secured credit demand rises and mortgage arrears soften.
Equifax’s latest snapshot showed that higher petrol prices, elevated living costs, and the recent cash rate increases had weighed on sentiment and “elevated housing market concerns”.
Yet, the data also pointed to a market that was still active, particularly in mortgages and other secured lending.
The bureau reported that overall secured credit demand grew by 4.9 per cent year on year in the March quarter, led by a strong rebound in home‑loan appetite.
Mortgage demand surged by 7.5 per cent compared with the previous corresponding period, while arrears rates across the major portfolios remained towards the lower end of the range seen in recent years.
Summarising the apparent contrast between grim headlines and robust activity, Equifax chief solutions officer Kevin James said the data underlined how crucial that resilience had been for the broader economy.
“With global uncertainty, supply chain disruptions, higher consumer borrowing rates and rising fuel prices, it is easy to suggest that we could expect to see a dramatic decrease in credit demand,” he said.
“However, it’s important to recognise that we can draw parallels to conditions consumers experienced in 2022 and 2023. The data demonstrates the resilience of Australia’s credit market, as long as factors such as unemployment remain low.”
Upgrades and refinances fuel mortgage growth
Equifax stated that the lift in mortgage demand was largely being driven by existing borrowers reshaping their debt, rather than by new entrants coming into the market.
The report showed a sturdy increase in mortgage inquiries in Q1 2026 but found that upgrades and refinancing were doing the heavy lifting, while new‑to‑market activity was slipping, with the category down 3.5 per cent compared with a year earlier.
James said this pattern reflected how households were responding to intense economic pressures.
“The reduction in new market entrants likely reveals that during a trying period of intense economic headwinds, Australians were focused on managing existing financial obligations and mortgage debt in Q1,” he said.
At the same time, James noted that those who were taking out new loans were, on average, borrowing more.
“For new mortgage accounts, borrowing limits are growing in dollar amount value up +6.7 per cent YoY, revealing that a smaller number of new accounts are driving portfolio dollar value growth,” he said.
He added that mortgage activity could often foreshadow movements in dwelling values.
“With mortgage lending being often a useful indicator of dwelling price direction, positive growth in mortgage demand could suggest the price cycle is yet to turn down,” he said.
Arrears edge lower, but larger personal loans under pressure
On the risk side, the figures showed arrears were stabilising or improving.
Mortgage arrears 90-plus days past due showed a modest positive shift, with Equifax reporting a 3‑basis‑point reduction in the share of active home‑loan accounts in arrears and a 2.2 per cent drop in total limits on those accounts compared with the 2025 March quarter.
Credit card performance also improved at the margin, with the 90-plus-day delinquency rate sitting at 0.31 per cent in Q1 2026.
The dollar value of card balances in arrears was down nearly 3 per cent year on year.
Equifax noted that this was “significantly driven by a 10 per cent reduction in arrears among the 18–25 age demographic”.
James said these trends reflected how households were responding to the three consecutive rate hikes and the ongoing cost‑of‑living crisis.
“The softening of mortgage and credit card arrears in Q1 showcases Australians’ responsible financial reaction to economic headwinds,” he said.
The one area of concern was in personal loans, where Equifax highlighted what it called “exposure divergence”.
While headline 90-plus-day arrears rates on personal loans stabilised and the volume of accounts in arrears improved by 14 bps, the financial value of those loans in arrears rose by 3.1 per cent.
[Related: Borrowers’ buffers tested as another rate hike looms]
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