Australians are going deeper into debt as they grapple with the rising cost of mortgages, credit cards, and personal loans.
According to the latest Australian Equifax Consumer Market Pulse report for the final quarter of 2025, credit card demand recorded the largest year-on-year (YOY) increase among all debt categories, rising 15.5 percent.
This was followed by mortgage credit demand going up 12.3 percent, personal loan demand at 8.9 percent, and unsecured credit card demand at 5.9 percent.
Meanwhile, car loan demand fell by 5.4 percent for the same period.
Equifax Australia Chief Solution Officer Kevin James said this was one of the largest increases in loan demand in the past five years.
“It’s likely to have been supercharged by the government’s expanded 5 percent First Home Buyer (FHB) Deposit Scheme that became available in October 2025, and buyers acting on the impression that rates had peaked in late 2025, and therefore rushed to lock in deals before the year’s end,” he said in a statement.
James noted that these buyers may have locked in some of the last lower rates for now, after the Reserve Bank lifted the official cash rate by 0.25 percentage points to 3.85 percent in February, following a series of post-COVID-19 pandemic rate cuts and pauses.
Larger Debt Burden for Borrowers
The report (pdf) also showed that the number of people falling behind on their mortgages remains unchanged, but the amount of money they owed increased by 6.8 percent.
“This increase in the dollar value of arrears debt for mortgages appears to correlate with higher house prices, potentially forcing buyers into larger loans that carry heavier repayment penalties,” James said.
Regarding personal loans, while there was an eight basis point improvement in delinquency rates for personal loan arrears, the total limits associated with late arrears (over 90 days) rose by 10 percent year-on-year.
“Essentially, it seems that fewer people are in trouble, but those who are, are carrying much deeper debt,” James said.
Gen Z Behind Boom in Credit Demand
When it comes to credit cards, the report noted that younger Generation Z Australians were driving demand.
“Interestingly, in Q4, we saw double digit growth (up 15.5 percent YoY) in the demand for credit cards,” James said.
“What struck me about this is that it was younger Gen Zs aged 18–25 driving this—with a 23.2 percent surge in demand.
“It’s the highest rate of growth we’ve seen among this cohort for credit cards in three years, and likely due to the wave of aggressive credit card incentive campaigns in the market during the past quarter.”
But James said there were concerns around Gen Z—these young borrowers were driving a 28.8 percent increase in credit card arrears, forcing financial institutions to take protective measures.
“In a decisive move to protect both the market and the consumer, lenders seemed to have tightened credit card limits, evidenced by a 8.3 percent year-on-year drop in average limits for new credit cards and a 3.9 percent decrease for personal loans,” James said.
“This proactive reduction appears to represent responsible lending in action, as banks prioritise stability over high-risk growth.”
Mortgage Demand Up in Queensland and WA
Meanwhile, Generation X Australians (those aged 46-55) recorded the highest mortgage demand growth at 13.6 percent YoY.
Geographically, the momentum was concentrated in the northern and western states, likely amid the current property boom as residents move out of the more expensive capital cities.
Queensland saw the nation’s strongest mortgage demand growth with a 17 percent YoY increase, followed by Western Australia (up 15 percent), and New South Wales (up 13.5 percent).
“Within the First Home Buyer segment, mortgage demand this past quarter among Gen Z (aged 18–30) was strongest in Western Australia (up 16.3 percent YoY) and Queensland (up 14.1 percent YoY)—both states where prices exhibit relative affordability to those in New South Wales and Victoria,” James said.
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