Commonwealth Bank Signals Concern Over Strong Home Loan Demand in Australia

Sydney — Commonwealth Bank of Australia, the country’s largest lender, said this week that demand for home loans remains unusually strong and is contributing to rising property prices across major cities, prompting renewed discussions about long-term stability in the housing market.

The bank’s leadership warned that while credit growth continues to boost financial performance, the current pace may not be sustainable over time.

Chief Executive Matt Comyn told lawmakers during a parliamentary committee hearing that the bank would prefer to see a more moderate level of credit expansion to support balanced economic outcomes and broader market accessibility.

He noted that high borrowing levels, combined with rising prices, are making it increasingly difficult for many Australians to enter the housing market.

Comyn explained that although the bank benefits financially from increased housing credit, long-term considerations such as equality of access, affordability, and responsible lending practices must guide decision-making.

He said a slightly lower credit growth rate could better support structural stability and help temper some of the pressures currently affecting home buyers and renters.

Recent figures from the Australian Bureau of Statistics showed a 6.4 percent rise in new loan commitments for dwellings in the third quarter compared with the previous quarter.

Analysts have pointed to strong investor activity and favorable lending conditions as key drivers behind the continued expansion of the mortgage market.

The Reserve Bank of Australia has also highlighted that overall housing credit has grown beyond its post-global financial crisis average, fueled largely by increased investor borrowing.

This trend has played a significant role in pushing demand upward at a time when the supply of new homes has not kept pace.

CBA has expanded its mortgage portfolio at a faster rate than many competitors, reporting 6 percent annual growth that brought its mortgage book to A$664.7 billion by the end of June.

Other major banks posted growth rates around 5 percent for financial years ending in September, reflecting broad strength in the sector despite the economic uncertainties surrounding interest rates.

Comyn said the current level of demand may ease if expectations around interest-rate cuts shift, with fewer borrowers anticipating lower rates in the near term.

He added that concerns about inflation could keep the central bank cautious, reducing the likelihood of rate reductions over the next year.

The bank’s internal outlook suggests that the cash rate is likely to remain at 3.6 percent through most of 2026, unless inflation meaningfully retreats.

This expectation could influence borrowing behavior as households reassess affordability and repayment planning under a prolonged higher-rate environment.

Economists say persistent demand for housing credit is partly linked to strong population growth and limited housing supply, especially in Sydney and Melbourne.

They note that regulatory settings, construction delays, and rising building costs have all contributed to a mismatch between available properties and the growing number of buyers.

Housing market pressures have continued to generate debate among policymakers, particularly around the question of whether regulatory intervention is needed to cool lending activity.

Some lawmakers have raised concerns that elevated credit growth may amplify vulnerabilities, especially if economic conditions shift or inflation remains stubbornly high.

Despite these challenges, the mortgage market remains one of the strongest pillars of the Australian financial sector, supported by stable employment levels and steady consumer demand.

However, analysts warn that prolonged high prices could eventually limit the ability of new buyers to enter the market, increasing barriers for first-home seekers.

Comyn emphasized that maintaining a sustainable housing system requires cooperation between banks, regulators, and government agencies to ensure responsible growth.

He reiterated that balanced credit conditions not only support financial institutions but also promote healthier competition and better outcomes for the wider community.

As Australia continues to navigate inflation pressures, shifting rate expectations, and housing affordability concerns, the trajectory of home loan demand is expected to remain a central issue in economic discussions.

Banks and policymakers will likely monitor trends closely as they consider measures to protect long-term stability while accommodating evolving market needs.