Investor lending jumps, as RBA “expects” higher property prices

New data from the Australian Bureau of Statistics shows that loans to property investors are driving growth in housing finance.

The data comes as the Reserve Bank of Australia says it expects its decision to cut interest rates in February, May and August of this year will lead to higher property prices.

The details

The ABS says the number of new investment loans rose by 3.5% in the June quarter of 2025, while new owner-occupier loans rose by a much smaller 0.9%. 

There were 49,065 new investment loans approved in April, May and June 2025, for a total value of $32.9 billion, a rise of 1.4% on the previous quarter.

The average investor loan size also rose by $1,103 to $674,259.

“The 3.5% quarterly growth in the number of investment loans follows two consecutive quarterly falls,” says Dr Mish Tan, the ABS’ Head of Finance Statistics.

“While annual growth slowed to 0.8% from 27.0% in the June quarter 2024, the number of new (investment) loans remained historically high,” Dr Tan says.  

The ABS says the number of new investor loans rose in most states and territories, the largest percentage rises being seen in the Northern Territory, (up 21.1% with 96 loans) and Western Australia (up 1.4% with 85 loans).

There were 80,929 new owner-occupier loans approved in the June quarter 2025, a 0.9% rise compared to the previous quarter, for a total value of $54.7 billion, a rise of 2.4%. 

The average owner-occupier loan size rose by $17,804 to $678,011.

“The average (owner-occupier) loan size has grown by 7.5% since the June quarter 2024,” Dr. Tan says.

“This was consistent with higher property prices, noting growth has been stronger in Queensland, South Australia and Western Australia.” 

Dr Mish Tan says the overall rise in new home loans in the three months till the end of June followed a fall in the March quarter. 

However, Dr Tan says lending activity is “still at relatively high levels.”

She also notes that while there have been RBA interest rate cuts in February, May and now August, the Bureau doesn’t expect to see “the full impact of these on new home lending activity until later in the year.” 

Borrowing power

Research from Domain Group shows that a dual-income household earning $150,000 before tax can now borrow roughly $53,700 more than it could six months ago – a lift of about 7%.

This is because banks are required to impose a “serviceability buffer above prevailing mortgage rates”, so interest rate cuts “will quickly filter through to higher maximum loan sizes,” Domain says.

With Domain and rival data houses, Cotality and PropTrack, noting the clear effect of previous rate cuts in February and May on boosts to national home price growth so far this year, it’s clear the RBA’s latest August cut and the increase in borrowing capacity it offers buyers will keep upward price pressure on property prices.

RBA “expects” home price growth

In fact, the Reserve Bank says it “expects” home prices to continue to rise as it continues to ease monetary policy.

At her press conference after the central bank announced its latest 25 basis point cut, RBA Governor Michele Bullock was asked if she was concerned that property prices might rise as a result of the three cuts so far this year and any other future rate cuts in this easing cycle.

The implication from the journalist asking the question, the Nine Network’s Chris Kohler, was clear: Is the nation’s central bank comfortable in the knowledge that its actions (lowering interest rates) risk inflating property prices further and locking even more Australians out of the housing market?

The Governor was clear.

The RBA expects home prices to rise as it cuts rates.

“One of the ways through which monetary policy works is through the housing market,” Ms Bullock explained.  

“It works through new housing starts, dwelling investment, and it works through people obviously getting a bit more confidence that they can purchase a house because interest rates are coming down.

“And the other thing it does is that as housing prices rise, it increases people's wealth, so that improves their feeling of well-being and that also increases consumption.

“I'd have to say, though, that the (monetary policy) easing so far has been fairly gradual and what we've seen so far is a fairly gradual recovery in housing activity broadly.

“So, yes, we would expect to see it (property prices rise) happen,” she said. 

“We hope it happens in a nice, measured way, but ultimately, we don't forecast property prices.

“We can't control what happens there because…property prices are about supply and demand ultimately in the housing market, and we don't control that.

“But we do know that historically, as interest rates fall, then activity in the housing market picks up; that's exactly what we'd expect, and it is one of the channels through which monetary policy works.”

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The take-out

So there you have it.

It’s not just “property spruikers” or vested interests in the property market talking up higher home prices. 

Two of the nation’s most senior bureaucrats believe the Australian housing market is set for takeoff.

The Head of Finance Statistics at the Australian Bureau of Statistics is expecting the volume of home loans to increase significantly as the effect of interest rate cuts that have already taken place show up in the form of more new mortgages…

…While the head of Australia’s central bank fully expects that home prices will rise, as a result of her monetary policy board’s decision to cut interest rates further.