Australia’s largest lender, Commonwealth Bank of Australia (CBA), has issued a cautionary message on the strength of the residential property loan market, saying that demand is “too high” and that the current rate of growth may be unsustainable.
A Market Growing Faster Than It Should
At a hearing in the Australian Parliament, CBA’s Chief Executive, Matt Comyn, told lawmakers that while the bank is benefiting from the sharp rise in housing credit, a slower pace of growth would be preferable for the long-term health of the financial system. He observed that housing credit growth is “pushing a higher level than perhaps policymakers and regulators might be ultimately comfortable with.”
Recent statistics from the Australian Bureau of Statistics show new loan commitments for dwellings rose by 6.4 % in the third quarter compared with the second. Meanwhile, the overall housing credit growth has climbed above the post-global financial crisis average, driven in large part by investor credit growth and lower interest rates. For the year to 30 June, CBA’s mortgage book grew roughly 6% to A$664.7 billion, with other banks reporting about 5 per cent growth in the year to 30 September.
What Makes the Bank Hesitant?
Comyn pointed out that the favourable rate environment has spurred demand, but she added that the expectation of interestrate reductions is fading. He noted the bank expects the cash rate to remain at 3.6% “more likely than not” throughout 2026, because inflation remains too high. This implies a potential turning point in the housing market: rapid credit expansion combined with consistently high interest rates leads to a fragile equilibrium. When demand exceeds sustainable growth, then there are risks to both financial stability and housing affordability. For instance, if borrowers commit to lower rates indefinitely, they may be vulnerable should policy change.
From a regulatory or macro-prudential standpoint, such rapid expansion in housing credit would be concerning. As the CBA basically acknowledges: yes, we are growing, but we aren’t just worried about it recklessly. Given the rate of growth, we may need to worry about a broadly unhealthy system or the welfare of future homebuyers.
Potential Impact on the Property Market
If CBA is correct and growth does moderate, several outcomes could follow:
- Property-price growth may ease. With strong loan demand driving up prices, a slowdown in credit could reduce upward pressure on valuations.
The borrower’s behaviour may adjust. Without the expectation of falling interest rates, potential buyers might become more cautious, which could soften demand.
- Banks and regulators may shift their posture. The fact that CBA is openly flagging the issue may prompt greater regulatory scrutiny or lending constraints to cool parts of the market.
- Housing accessibility may improve gradually. Slowing credit growth could reduce investor dominance (which has been noted as a key driver) and provide more space for owner-occupiers to participate.
The Takeaway for Industry Players
For homeowners and prospective borrowers, borrowing remains accessible, but caution is wise, as locking in favourable terms may prove prudent. Relying on continued rapid price growth is risky. For investors, CBA’s alert signals that cheap money may be at an end and implies it is time to reassess their exposure to risks arising from interest rates and credit. For banks and regulators, increasing housing credit suggests that systemic risk is also building; that will likely reinforce the impetus to tackle buildups of such risk, where relevant, including sustainability and potential macroprudential measures to take the heat out of excesses.
The public comment from Australia’s biggest lender is notable, as it is rare for commercial banks to warn that growth is “too high” when lending is their core business; yet CBA is signalling that the pace of housing credit expansion may be entering dangerous territory for pricing, accessibility, and financial stability. With interest-rate expectations shifting and regulators paying close attention, the housing market could be moving into a more cautious phase, and for those involved in housing finance, property development, or bank-lending strategies, this moment calls for recalibration.
