Mortgage Competition Remains Strong as Investor Lending Surges
Mortgage Competition Remains Strong as Investor Lending Surges
New analysis from S&P Global Ratings suggests mortgage competition is set to remain intense across Australia, driven largely by a surge in investor activity and an increase in higher-risk lending segments.
According to S&P’s RMBS Performance Watch for the September 2025 quarter, investor loans now represent around 40% of all new home lending, marking one of the strongest investor periods in recent years. The ratings agency noted that investor participation typically rises during periods of price growth and is less sensitive to pauses in interest rate cuts.
At the same time, first-home buyers are increasingly relying on schemes such as the expanded 5% Deposit Scheme, allowing them to borrow at higher debt-to-income levels. While this supports entry into the market, it also contributes to rising household leverage.
The Australian Prudential Regulation Authority (APRA) echoed these concerns last week, warning of growing pockets of higher-risk lending. These include more high-DTI and high-LVR loans, as well as intensified competition among banks and non-banks seeking to retain and acquire borrowers.
Despite these pressures, national mortgage arrears remain stable. Prime RMBS arrears dipped to 0.82%, while non-conforming arrears eased to 3.62%, supported by ongoing refinancing activity.
Investor arrears continue to outperform owner-occupiers, sitting at 0.62%, compared to 1.01% for owner-occupied loans.
For Western Australia, where low housing supply and strong buyer demand continue to shape the market, these trends point to sustained competition heading into 2026. Borrowers may benefit from stable rates but should remain mindful of tightening lending conditions and rising investor activity.