ADI assets top $7tn as investor pipeline cools

Net profit after tax rose 7.5 per cent to $42.5 billion, while the sector’s total capital base increased 3.7 per cent to $480 billion.

Residential property credit continued to expand despite the emerging weakness in new borrowing.

Total ADI residential credit outstanding rose 7 per cent annually to $2.56 trillion, up from $2.39 trillion a year earlier.

The mix of that mortgage book also continued to tilt towards investors, with investment loans accounting for 31.2 per cent of ADIs’ residential property exposures at June, compared with 30.5 per cent a year earlier.

The owner-occupier share declined by 0.8 percentage points to 66.7 per cent.

Investor share rises in funded lending

New loans funded by ADIs rose 6.8 per cent year on year to $200.5 billion in the June quarter, with investor borrowers claiming a slightly larger share of settlements.

Investment loans represented 35.6 per cent of new loans funded, up from 34.1 per cent a year earlier, while the owner-occupier share fell from 63.6 per cent to 61.9 per cent.

The figures point to investors retaining a greater presence in loans progressing through to funding, even as the latest commitment data signals a softer pipeline ahead.

The Australian Bureau of Statistics (ABS) found the number of new dwelling-loan commitments fell 5.4 per cent over the June quarter to 134,225, with investor loans driving the downturn.

Investor commitments dropped 8.6 per cent, or 4,966 loans, following a 4.7 per cent fall in the March quarter. The June-quarter fall was the largest in investor lending since September 2022.

The value of total new dwelling commitments declined 5.2 per cent to $97.65 billion, while investor commitment values fell from $41.32 billion in March to $37.12 billion in June.

Owner-occupier commitments also fell 3.3 per cent to 81,626, while owner-occupier first home buyer loans declined 2.9 per cent.

The pullback follows three cash-rate increases earlier in the year and the federal government’s budget announcements of changes to negative gearing and capital gains tax, due to commence in July 2027.

Consumer credit reporting agency Equifax also found that overall mortgage demand was down 14.1 per cent year on year in August 2026, marking a fifth consecutive monthly decline.

The deterioration was more pronounced among FHBs, whose mortgage demand plunged 20.1 per cent nationally compared with August last year.

The major banks have also reported double-digit declines in mortgage applications since the federal budget.

Asset quality holds firm

APRA’s data nevertheless suggests mortgage-book performance remained contained at the end of June.

Loans 30–89 days past due fell to 0.54 per cent of ADIs’ residential exposures, from 0.66 per cent a year earlier, while non-performing loans eased from 1.04 per cent to 1.01 per cent.

The share of existing residential loans with loan-to-value ratios of at least 80 per cent also fell by 0.9 percentage points to 16.7 per cent.

Higher-debt lending was broadly stable, with 5.6 per cent of new loans funded at debt-to-income ratios of at least six times. That share was higher among investors, at 8.9 per cent, than owner-occupiers, at 3.7 per cent.

At the system level, ADIs’ capital ratio edged up to 20.5 per cent, and their liquidity coverage ratio rose to 133 per cent, underscoring that growth has been accompanied by solid aggregate capital and liquidity buffers.

[Related: FHB lodgements recover slightly as investor pre-approvals plunge]