Property Investor Lending Falls at Record Pace as Arrears Rise 2026

Property investor lending in Australia has fallen at its fastest pace on record, with new loans to landlords dropping sharply in the three months to September. The decline comes as higher taxes, plunging property prices, and rising interest rates reshape the investment landscape.

At the same time, the country's largest lender, Commonwealth Bank (CBA), reported that the share of its customers struggling to repay their mortgages climbed to a 12-year high. The quarterly trading update showed that borrowers 90 days or more behind on repayments rose from 0.73% to 0.8% of total lending.

Why Property Investor Lending Is Falling So Fast

The record drop in investor lending reflects a perfect storm of pressures on landlords. Higher taxes on investment properties, combined with falling property values and rising interest rates, have made many investors rethink their strategies.

As Jim Chalmers, the treasurer, was again forced to defend his budget reforms, the data underscores the challenges facing the housing market. Investors are retreating, and first-home buyers are stepping in to fill the gap.

Mortgage Arrears Climb to 12-Year High at CBA

CBA's update revealed that the share of borrowers falling behind on their home loans has reached its highest level since 2014. According to Nathan Zaia, a senior equity analyst at Morningstar, rising arrears rates are happening across the banking sector and "probably hadn't peaked."

However, Zaia noted that the increase is from a low base. "We've had a long period of uncharacteristically very low arrears rates, so it's not unexpected that they are starting to drift higher," he said.

Nico de Lange, director of financial institution ratings at S&P Global, added that despite rising arrears, "it doesn't look like there is any significant" deterioration in credit quality.

What This Means for Borrowers and Investors

The shift in lending patterns has significant implications for both investors and homeowners. Investors facing higher costs may exit the market, potentially easing competition for first-home buyers. However, rising arrears signal that some households are feeling the pinch of higher repayments.

For those looking to enter the market, opportunities may arise as investor activity slows. But it's crucial to understand the lending landscape and seek expert advice.

• Property investor lending fell at its fastest pace on record in the September quarter.
• CBA's mortgage arrears rate rose to 0.8%, the highest in 12 years.
• Rising interest rates and higher taxes are driving investors away.
• First-home buyers may benefit from reduced competition.
• Arrears are rising from a low base, but the trend is upward.

Comparing Investor and Owner-Occupier Lending Trends

The table below summarizes the key lending and arrears data mentioned in the report.

Expert Outlook: Arrears Likely to Rise Further

Analysts suggest that arrears rates may continue to climb as interest rates remain elevated. Zaia's comment that arrears "probably hadn't peaked" indicates that more borrowers could fall behind in the coming months.

However, the overall level of arrears remains low by historical standards. The increase from 0.73% to 0.8% is modest, and de Lange's assessment suggests no systemic crisis.

What to Watch Next

Market watchers will be focused on upcoming lending data and further bank updates. The Reserve Bank's interest rate decisions will also play a critical role in shaping borrower behavior.

As investors pull back, the composition of the housing market may shift, with more opportunities for owner-occupiers. Keeping an eye on these trends is essential for anyone involved in real estate.

For a deeper dive into the investor pullback, see how property investor lending falls sharply in Australia housing market and what it means for future supply.

Meanwhile, first-home buyers are already capitalizing on the changed conditions, as first home buyer loans surge as investors retreat. This shift could help rebalance the market.

If you're looking to reduce your mortgage costs, consider these mortgage savings tips as Australian home loans get cheaper. Even small changes can make a big difference.

The banking sector is also undergoing significant change, with HSBC exiting Australia: all branches closing, Blackstone buys loans. This could affect competition and customer choice.

For those interested in sustainable upgrades, UK warm home loans fund solar panels and heat pumps offer a model for green financing. Such initiatives could inspire similar programs in Australia.