Offset balances drop by a record $8.6 billion as loan arrears climb

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Kooky

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The Australian Prudential Regulation Authority published its June quarter statistics on banks' property lending on Thursday 17 September 2026. They show $2,558.5 billion in home loans outstanding at banks and other authorised deposit-takers, of which 1.01 per cent was non-performing, and offset account balances of $340.5 billion. The comparison site Canstar, which analysed the release the same day, calculates that offset balances fell by $8.6 billion in three months, the largest quarterly fall in dollar terms on record.

The release is the regulator's account of the quarter in which the cash rate rose for the third time this year. It does not break its figures down by state, so it describes the lending system Queensland borrowers sit inside, not Queensland alone. Read with care, it shows households under more pressure than a year ago and a system with a good deal of protection still in it.

APRA quarterly authorised deposit-taking institution property exposures, June 2026, published 17 September 2026; quarterly changes as calculated by Canstar.

Arrears: above the recent average, below last year

APRA uses the term non-performing for loans that are 90 days or more past due, or that the lender judges unlikely to be repaid in full without selling the security. At 1.01 per cent of the $2,558.5 billion outstanding, that is $25.9 billion of home loans, the figure Canstar reports.

Which way that number is moving depends on the comparison. Canstar's reading is that the rate has now risen for two quarters in a row and sits above its average since 2019, which it puts at 0.93 per cent. APRA's own highlights set the June figure beside a rate of 1.04 per cent for the comparison period a year earlier, which makes it slightly lower over twelve months. Both statements can hold: arrears eased through 2025 while interest rates were lower, and have turned up again in 2026.

The earlier warning sign follows the same pattern. Loans between 30 and 89 days past due, borrowers who have missed one or two repayments, were 0.54 per cent of the total. Canstar notes a second consecutive quarterly rise; APRA's highlights show 0.66 per cent for the year-earlier comparison.

Sally Tindall, Canstar's data insights director, described arrears as starting to flash amber. She also put the figures in proportion, saying: "None of these figures, on their own, suggest we're staring down the barrel of a mortgage crisis."

The regulator's numbers sit comfortably with those from other sources this quarter. Commonwealth Bank reported on 12 August that its home loans 90 days or more behind rose from 0.63 per cent in December to 0.73 per cent in June. S&P Global Ratings, measuring securitised prime loans more than 30 days behind, put the national rate at 0.85 per cent in June and Queensland's at 0.55 per cent, the lowest of the large states, the trade publication MPA reported on 28 August. Each source counts a different set of loans in a different way, and all of them show a rise from a low level.

The fall in offset balances

An offset account is a transaction account linked to a home loan. The balance is subtracted from the loan before interest is calculated, so $50,000 in offset against a $600,000 loan means interest is charged on $550,000. For households it is the main store of spare money, and for anyone watching financial stress it is the cushion that is used before a repayment is missed.

At the end of June those balances stood at $340.5 billion, about 13.3 per cent of all home loan credit outstanding. Over twelve months they grew by $38.6 billion, or 12.8 per cent, on Canstar's calculation. Over the June quarter alone they fell by $8.6 billion, or 2.5 per cent.

One quarter's fall has more than one possible cause, and the release does not say which applies. Households may be drawing on savings to meet repayments that have risen three times this year. The Reserve Bank's August minutes, published on 25 August, noted that extra mortgage payments had eased while remaining around their long-run average. The June quarter also includes the end of the financial year, when some households pay tax bills and others move money. And a year in which balances grew by almost 13 per cent leaves room for a pause.

What can be said is that the direction changed in the quarter the third rate increase took effect, and that the borrowers with the least in offset are the ones who feel it. An average of 13.3 per cent of the debt conceals a wide spread: many owners with older loans hold large balances, and many recent buyers hold very little.

More loans approved outside the standard test

Before approving a home loan a bank must check that the borrower could still meet the repayments if the interest rate were 3 percentage points higher than the rate on offer, a setting APRA confirmed in May that it was keeping. Each bank also has its own policy on how income and expenses are counted. A loan approved outside that policy is recorded as an exception to serviceability policy, and APRA collects the total.

In the June quarter those exceptions came to $11.6 billion, or 5.8 per cent of the $200.5 billion in new home loans funded. Canstar calculates that the dollar value rose by $2.3 billion, or 24 per cent, from the March quarter.

An exception is not a sign of careless lending in itself. Banks use them for borrowers whose circumstances do not fit a standard calculator but who can show they can pay: someone with strong savings and a short work history, or a customer refinancing a loan they are already meeting from another lender at a lower rate. The second case has become more common as rates have risen, because a borrower can be paying a loan without difficulty and still fail a test set 3 points above today's rate.

A rise of a quarter in three months is still large enough to watch. It suggests that more applicants are arriving at the edge of what standard policy allows, which is what higher rates and record loan sizes would be expected to produce.

Low-deposit lending since the scheme was widened

The Australian Government's 5% Deposit Scheme, which lets eligible first home buyers purchase with a 5 per cent deposit without paying lenders mortgage insurance, was widened on 1 October 2025. Canstar has tracked how much lending at that level has been written since.

The dollar amounts have moved within a narrow band. The share has edged up each quarter, from 4.03 per cent of new owner-occupier lending in the December quarter to 4.31 per cent in June, because total lending has slowed while low-deposit lending has held.

Wider measures of deposit size moved the other way. APRA's highlights show that 29.7 per cent of all new home loans in the quarter had a loan-to-value ratio of 80 per cent or more, down from 30.4 per cent a year earlier. Across the whole stock of existing loans, 16.7 per cent sat at 80 per cent or more, down from 17.6 per cent. Five in six existing home loans, in other words, are backed by at least 20 per cent equity as the banks measure it.

A loan written with a 5 per cent deposit has the least protection against a fall in prices, and Queensland is where that now matters. Cotality's index, published at the start of September, showed Brisbane home values down 2.7 per cent over the three months to August. A buyer who settled in the autumn with a 5 per cent deposit has seen roughly half of that margin absorbed, on paper, by the change in values. That affects the ability to refinance or sell without a shortfall, not the ability to make repayments, and it reverses if prices recover.

What the release means for Queensland borrowers

APRA publishes national totals, so the Queensland reading has to be assembled from what is known about the state.

Queensland borrowers are, on the evidence available, behind on their loans less often than borrowers elsewhere: S&P's 0.55 per cent against 0.85 per cent nationally. They are also borrowing more. The Australian Bureau of Statistics put the average new owner-occupier loan in the state at a record $751,000 in June, $20,000 above the national average. And first home buyers remain active, with 5,646 first home buyer loans written in Queensland in the June quarter.

Put together, that describes a state where the stock of older loans is in good order, protected by years of price growth, and where the newest loans are large and thinly cushioned. The national trends in this release, lower offset balances, more policy exceptions, steady low-deposit lending, bear most on that second group.

A release without commentary

APRA now publishes these statistics as tables and a short list of highlights, without the written analysis that once accompanied them. Readers who want the trend have to compare quarters themselves or rely on analysts who do, which is why two accurate descriptions of the same arrears figure, one against last quarter and one against last year, can sound as if they disagree.

The investor side of the same release, including the rise in investors' share of new lending to 35.6 per cent and the regulator's limit on high debt-to-income loans, is a separate story from the one told here about borrowers' buffers and arrears.

What is due next

The Reserve Bank's Monetary Policy Board meets on 28 and 29 September. Several lenders raised fixed rates this month, and economists at all four major banks now expect a further increase in the cash rate by November, MPA reported on 17 September. Any rise will pass through to variable repayments within weeks and will be tested against the buffers described above.

The Reserve Bank is also due to publish its half-yearly Financial Stability Review in early October, which estimates how many borrowers are spending more than they earn after repayments. APRA's September quarter edition of these statistics follows in December 2026.

Kooky, from Shaka

Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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