Credit demand is picking up across Australia, but new data shows signs of mounting financial stress – especially among borrowers with larger home loans and post-holiday credit card debt.
According to Equifax’s Q1 2025 Consumer Credit Report, unsecured credit demand rose for the second consecutive quarter, climbing 5.5% year-on-year, while secured credit – including mortgages and auto loans – increased 4.3%. A strong lift in mortgage refinancing drove most of the gains in secured credit.
The data comes as national home prices hit a record $831,288 in May – nearly eight times the average income – while ANZ-Roy Morgan consumer confidence fell to 86.4 following RBA’s rate cut to 3.85%, underscoring persistent economic unease despite rising property values.
Mortgage demand rose 5.2% in Q1 2025 compared to Q1 2024, with consumers responding to market expectations of interest rate cuts by seeking better loan terms.
External refinancing grew 11% year-on-year, the first positive Q1 result since 2023. In March 2025 alone, external refinancing exceeded 20% of all mortgage inquiries.
“This proactive consumer behaviour is evident again in anticipation of potential rate cuts,” the report said, comparing the trend to the refinancing surge seen after rate hikes in 2022.
Investor borrowers led the refinancing wave, accounting for up to 80% of total refinance inquiries in March 2025, compared to around 60% in March 2024. This indicates investors are now more than twice as likely to refinance than owner-occupiers.
Equifax found that over 30% of refinanced loans in Q1 2025 originated during the low-rate period of 2020-2021. Many of these borrowers had previously refinanced in 2022-2023 amid high-volume lender offers during rising rates.
While mortgage demand has recovered, larger loans are showing signs of financial strain. Equifax reports a sharp rise in dollar value of mortgages over 90 days past due, driven primarily by high-value loans exceeding $1 million.
These larger mortgages now exhibit the highest arrears rates across all loan size segments, marking the first time on record they’ve outpaced smaller loan cohorts. Arrears on big-ticket loans have grown four times faster than other segments over the past two years.
Borrowers aged 31-45 are experiencing the fastest arrears growth, highlighting pressure on younger mortgage holders with high debt exposure.
Although the number of accounts in 90+ day arrears has remained relatively stable, total limits in arrears rose to 9.2% in Q1 2025, indicating that distressed borrowers now hold larger average debts than a year ago.
Amortised limits also rose, hitting a five-year high, up 5% year-on-year. Queensland led the growth at 7.8%, followed by 4.5% in NSW and 3.7% in Victoria.
Australians appear to be feeling the financial aftermath of the holiday season. Credit card arrears jumped 19.3% year-on-year, with both early- and late-stage delinquencies on the rise.
The average limit for accounts over 90 days past due rose to $7,100 in Q1 2025, up from $6,900 a year earlier.
While personal loan arrears rates improved slightly due to portfolio expansion, the total limits in arrears surged 18.7%, with the average delinquent loan at $12,000 – a 10% year-on-year increase.
Auto loans remained stable year-on-year, but arrears rose 7.1% from the previous quarter.
Credit cards and auto loans recorded the highest increases in accounts reported as experiencing financial hardship, at 5.8% and 5.1%, respectively – signalling broad-based overspending pressures.
With larger debts and more consumers showing signs of strain, Equifax urged lenders to enhance risk monitoring, particularly around high-value mortgage portfolios and unsecured debt.
