Falling Equity and Rising Arrears: Australia’s Emerging K-Shaped First Home Market

Snapshot: Equifax Consumer Credit Analysis - Q3 2026

• Mortgage demand fell sharply in Q3 2026, down -16.6% YoY, while mortgage limit balances behind late delinquencies rose +5.8% YoY.
• Mortgage hardships intensified, up +3.34% from the previous quarter, with state level stress most pronounced in Victoria. 
• A K-shaped market is emerging among First Home Buyers, with falling equity meeting rising arrears. 

SYDNEY – November 2026 – Australia’s First Home Buyer (FHB) market is splitting in two, with a cohort of buyers at risk of increased mortgage stress, according to the latest data from Equifax Australia. 

The Q3 2026 analysis by Equifax into consumer credit trends reveals a K-Shaped market is emerging among FHBs who took advantage of the Government’s 5% deposit scheme. Splitting the 5% Deposit Scheme cohort by industry reveals two distinct profiles: a resilient group, made up of buyers who are likely to be employed in a more stable or higher income profession, and an exposed group, employed in rate- and discretionary-sensitive sectors. 

“As a cohort, First Home Buyers already exhibit structurally higher arrears rates when compared to the rest of the market. For mortgage holders whose livelihoods are more exposed to macroeconomic headwinds, this only increases their risk of potential default. We see this clearly reflected in our data. Stress is likely running higher among buyers in the exposed group, who are considerably more likely to be in mortgage arrears than those on the resilient road,” said Kevin James, Chief Solutions Officer at Equifax Australia. 

“Add to this falling property values, and a concerning picture begins to emerge. Because the 5% deposit scheme implies ~95% LVR at origination, even modest price falls could push the exposed cohort toward negative equity. FHBs juggling both sides of this equation - high arrears and falling valuations - may start to feel that their homeownership dream is causing more of a challenge than initially anticipated.”

Falls Cluster in Premium Pockets

Equifax data also reveals the amount borrowed by FHBs using the 5% deposit scheme has shifted. The average mortgage enquiry among the top quartile of borrowers increased by an average of $22k between October 2025 and September 2026. Conversely, the bottom quartile lost ground, with average enquiry amount falling $15k over the same period. 

In the capital cities, the biggest declines in average FHB mortgage size appear to be in premium suburbs. The suburb of Manly (Sydney) saw the deepest capital-city fall of -18.7% or $249k off the average loan, while Richmond (Sydney), Brookfield (Brisbane) and  Stonnington (Melbourne) all recorded significant declines in the average FHB mortgage size between October 2025 and September 2026. 

Outside the capitals, Queensland’s Granite Belt had the deepest fall, with the average FHB loan for homes in the area dropping -23.3% or over $150k. Higher end coastal hubs like Noosa also show drops of over $100k in the average FHB mortgage.

“These are highly sought-after suburbs, so first home buyers who were quick to leverage the 5% deposit scheme may have stretched themselves a little further to get their foot in the door. However, we can see that buyers are now borrowing substantially less than they were a year ago in order to buy into these suburbs, suggesting a significant drop in house prices in these areas,” James said.

Consumer Credit Contracting as Overdue Balances Grow

A combination of the mid-year rate hike and the government's tax reforms drove a sharp contraction across consumer credit. Secured credit demand fell ‑14.5% YoY, led by a ‑16.6% drop in mortgages and a ‑4.4% decline in auto loans. Unsecured demand eased ‑7.1% YoY, dominated by a ‑40% collapse in BNPL. Bright spots were narrow: personal loans edged up +0.6% and credit cards bucked the trend at +4.0% growth YoY.

Although headline arrears remain stable, the amount owing continues to climb. Mortgage limit balances behind late delinquencies rose +5.8% YoY, and personal loan limits at risk surged +14.9% YoY. 

Mortgage hardship intensified nationally in Q3 2026, with mortgage hardship accounts expanding +3.34% QoQ driven by ongoing rate adjustments and debt-servicing friction. In more positive news, non-mortgage hardship accounts fell -1.6% QoQ despite Personal Loans maintaining a high 1.05% rate.

“The highest interest rates in 18 years seem to be having a notable impact on consumers' appetite for credit. With another rate rise predicted, and as overdue balances creep up, we expect to see continued credit caution among Australian consumers,” James observed. 

-ENDS-

Chart 1: Quarterly Demand Movement – Secured vs. Unsecured Credit

Source: Equifax Australia

Chart 2: Change in average FHB mortgage size - top 25% vs bottom 25% of borrowers (Oct25 vs Sep26)

Source: Equifax Australia

Chart 3: Largest change in average FHB mortgage size - Sa3 Regions Per Capital City (Oct25 vs Sep26)

Source: Equifax Australia

Chart 4: Largest change in average FHB mortgage size - SA3 Regions Per State (Regional Areas - Oct25 vs Sep26)

Source: Equifax Australia

Chart 5: Share of 5% Deposit Scheme buyers vs 30+ days arrears rate by industry of employment

Source: Equifax Australia

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NOTE TO EDITORS
The Equifax Consumer Market Pulse measures the volume of credit card, personal loan applications, Buy Now Pay Later, mortgages and auto loan applications that go through the Equifax Consumer Credit Bureau by financial services credit providers in Australia. Credit applications represent an intention by consumers to acquire credit and in turn spend; therefore, the index is a lead indicator. This differs to other market measures published by the RBA which measure credit provided by financial institutions (i.e. balances outstanding). Equifax may quote publicly available data and known information from reputable sources (such as, but not limited to, RBA, Consumer Price Index, ABS, CoreLogic) in the Market Pulse to provide greater context on the market conditions surrounding Equifax observed credit trends. 

DISCLAIMER
Purpose of Equifax media releases:
The information in this release is for general informational purposes only and is current as of November 2026. The information in this release does not constitute legal, accounting or other professional financial advice. The information may change, and Equifax does not guarantee its currency or accuracy. To the extent permitted by law, Equifax specifically excludes all liability or responsibility for any loss or damage arising out of reliance on information in this release and the data in this report, including any consequential or indirect loss, loss of profit, loss of revenue or loss of business opportunity.