Buy Now Pay Later growth led at 17.8%, followed by a 5.7% increase in credit demand for personal loans and a marginal 0.4% rise in credit cards. 

Secured credit, encompassing mortgages and auto loans, also expanded by 4.3% in Q1 2025 year-on-year. A surge in mortgage demand was the primary driver, while auto loans saw a modest 0.3% increase. 

NB: This data has been re-indexed from 2019 to account for the recent inclusion of BNPL applications: Re-indexed data to commence in 2019 (previously 2015). Added BNPL and auto loan credit enquiries as a separate trendline (previously rolled up into personal loans)

The robust credit appetite of this year’s first quarter is contrasted by escalating arrears and financial hardship, notably within larger mortgage portfolios and among consumers navigating post-holiday debt.

Key themes explored below:

Refinancing activity fuels mortgage market rebound

Mortgage demand saw a significant uplift in Q1 2025, increasing by 5.2% compared to Q1 2024. This was primarily driven by a substantial rise in external refinancing - consumers switching lenders - which grew by 11% year-on-year, marking the first positive Q1 result since 2023. 

External refinancing exceeded 20% in March 2025, as consumers actively sought more competitive rates in response to market shifts. The interest rate hikes initiated in 2022 triggered a similar pattern, and this proactive consumer behaviour is evident again in anticipation of potential rate cuts. 

Given mortgage approval timelines, this trend is likely in its early stages. Ongoing global tariff uncertainty and their potential impact on interest rates suggest consumers will continue to actively manage their mortgage positions.

Investors dominate mortgage refinancing

Investor activity dominated the refinance market, representing up to 80% of total inquiries in March 2025, compared to approximately 60% in March 2024. This demonstrates investors are over twice as likely to refinance compared to owner-occupiers, likely capitalising on favourable economic conditions and anticipating further rate reductions. 


Examining refinance trends in Q1 2025 reveals that over 30% stemmed from mortgages originated during the low interest rate period of 2020-2021. A notable share of this activity also involves borrowers who had previously refinanced, largely in 2022-2023, when refinance volumes peaked amidst rising rates and available offers.

Mortgage holders with large loans exhibit increasing repayment strain

While overall mortgage demand has increased, a significant rise in the dollar value of mortgages over 90 days past due signals growing repayment challenges among borrowers with larger loan amounts. 

Mortgage debt has expanded due to sustained higher mortgage borrowings driven by property valuations. Larger mortgages, exceeding $1 million, are displaying unprecedented repayment stress, with arrears rates surpassing all other loan size segments for the first time on record. 

In fact, arrears on larger loans have grown four times faster than other loan sizes over the past two years. This upward trend in delinquency spans all age groups, with the 31-45 year cohort showing the fastest growth.

Despite a stable number of accounts in 90+ day mortgage arrears, total limits in arrears have increased to 9.2% in Q1 2025 compared to the same period last year. This divergence highlights that financially stressed borrowers are accumulating larger debt burdens, with limits owed per account in arrears rising persistently amid deteriorating housing affordability post the pandemic property boom.

In another sign of consumer strain, amortised limits rose in Q1 2025, up 5% year-over-year to a five-year high. Victoria's growth trailed other states, with a growth rate of 3.7% compared to Queensland's strong 7.8% and 4.5% in NSW.

This escalating debt burden necessitates granular risk assessment, emphasising close monitoring of high-value mortgages for financial stress and proactive provision of support options to mitigate potential losses.

Holiday debt impacts consumer credit health

The financial aftermath of the holiday season is evident in the Q1 2025 data. Credit card arrears saw a significant year-on-year surge of 19.3%, indicating holiday-related debt is impacting consumers, with both early and late-stage delinquencies on the rise. The average limit for accounts over 90 days past due reached $7,100 in Q1 2025, up from $6,900 at the same time last year. 


Credit card delinquency rate

The total amount owing across all credit products has increased. While the proportion of personal loan accounts in arrears improved, this is attributed to nominal account growth due to portfolio expansion. However, the total limits in personal loan arrears has also grown, up 18.7% in Q1 2025 compared to the same period the previous year, with the average delinquent loan at  $12k, a 10% year-on-year increase.

Personal loan delinquency rate

Auto loan arrears growth, at 7.1% in Q1 2025, saw a slight deterioration from the previous quarter and remained stable year-on-year. 


Auto  loan delinquency rate

Crucially, the dollar amount owed by consumers in arrears has increased significantly across all product types, highlighting a broad trend of potential overspending during the holiday period. Credit cards and auto loans recorded the largest increases in accounts reported as experiencing financial hardship, at 5.8% and 5.1%, respectively. 


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