Despite a tightening of regulations on risky lending, home loans in Australia are expected to grow by 6% in 2026. Analysts say the demand for housing will remain strong, with banks pushing forward to meet the needs of borrowers.
APRA’s Crackdown: What Does It Really Mean?
Earlier this year, APRA introduced tighter controls on home lending, focusing on limiting high-risk loans. Specifically, the regulator has placed restrictions on the debt-to-income (DTI) ratios, aiming to curb excessive borrowing by individuals who might be overstretched. In theory, this should cool down the housing market by preventing risky borrowing habits that could destabilize the economy.
However, experts argue that the impact of these new rules will be minimal in terms of the overall mortgage market. The 6% expected growth in 2026 seems to suggest that the market will largely absorb these changes without much trouble, explains AFR. Housing demand is expected to stay strong, especially with limited supply in certain areas and interest rates remaining relatively low. In short, while APRA’s crackdown is intended to slow things down, it seems to be facing a headwind of its own: the persistent need and desire for home ownership.
Home Lending Growth: Banks Gear Up for Increased Competition
Interestingly, banks are not stepping back from the home loan market. If anything, they are gearing up for more competition, with several CEOs of the big banks stepping forward with ambitious plans to increase their market share. Commonwealth Bank, while the dominant player, will face more competition from rivals eager to carve out their piece of the mortgage pie. In fact, one of the strategies banks are employing is offering more home loan options and better deals for customers, all while adhering to the new regulations.
This is where the competitive nature of the banking sector could actually benefit the Australian public. As banks strive to increase their home lending portfolios, we might see more innovative products, improved customer service, and perhaps even more favorable rates for borrowers.
Housing Demand Still High
At the heart of this is the fact that housing demand is still incredibly strong, especially in certain markets. With many Australians still keen on property as an investment and the rising cost of living pushing people to look for more permanent housing solutions, the desire for home loans is unlikely to wane anytime soon. This continued demand, paired with a growing competitive landscape, means that home lending will continue to expand, even with APRA’s regulatory push.
In the end, despite regulatory hurdles, the Australian housing market is expected to keep growing. Banks are set to continue their lending spree in 2026, driven by competitive forces and strong demand. While APRA’s measures are designed to temper risky borrowing, they don’t seem to be choking off the broader growth of the mortgage market. For now, it looks like home lending will continue to play a key role in Australia’s financial landscape.
