Credit Stress in Australia: The State-by-State Trends Every Borrower Should Understand
Feature Image: Credit stress in Australia
Australia’s credit landscape has shifted notably over the past six years. Borrowing remains high, loan sizes keep growing and many households are relying on refinancing to manage rising costs. At the same time, arrears data has become less dependable which means looking at broader lending behaviour is essential for understanding where financial pressure is building.
To help Australians make sense of these changes Real Credit Repairers analysed ABS Lending Indicators and APRA loan performance data. The following summary highlights the key insights from this study in a clear and accessible way.
Australians are still borrowing heavily despite reduced affordability
Housing loan commitments are still much higher than they were before the pandemic, even though buying a home has become tougher for many people. NSW and VIC continue to make up a big share of new loans but QLD has been steadily catching up. Smaller states such as SA and TAS are holding strong while WA and the ACT have slowed down.
This tells us that credit pressure is shifting rather than easing. In some states people are still pushing hard to buy homes which can mean stretching their budgets to make it work.
Younger buyers are moving toward smaller markets
First-home buyer activity is changing across the country. NT and the ACT now have the highest share of first-home buyers with both sitting above 40 percent. These areas also have lower average loan sizes, which makes it easier for younger buyers to get in.
In larger states like NSW, QLD and SA the share of first-home buyers has dropped. This suggests that buying a first home in those markets is becoming harder and some buyers may be pausing their plans or looking to other states where the cost is more manageable.
Why high first-home buyer activity can be a stress signal
The report highlights a point that is important but often missed. A high level of first-home buyer activity can look positive but it can also be a sign of rising pressure. First-home buyers usually have smaller savings and higher loan-to-income ratios which means they have less room to move if conditions change.
When states like NT, TAS and the ACT see more first-home buyers entering the market it may show confidence but it may also mean people are taking on commitments that stretch their budgets. This does not make the trend negative, but it is a useful sign of where financial pressure may be building faster.
Image: First home buyers
Loan sizes are rising quickly across most states
The average owner-occupier loan has climbed from under $400k in 2019 to above $600k in 2025. NSW now sits around $816k and QLD is above $660k. WA, QLD and SA have seen some of the strongest year-on-year increases.
When loan sizes rise this quickly it becomes harder for households to maintain buffers or keep repayments manageable. Larger loan amounts usually mean higher long-term pressure which can flow through to credit health if things become difficult down the track.
Refinancing is helping households stay afloat
Refinancing remains close to record highs, with more than $20 billion in loans moving between lenders each quarter. Many Australians are using refinancing to reduce repayments, improve loan terms or create a bit more room in their budget. External refinancing is still more common than internal changes, showing borrowers are willing to switch lenders to secure better options.
Personal loans have also risen sharply since 2019. This growth in unsecured credit often appears when households are covering day-to-day costs or shortfalls rather than planned purchases, which can signal increasing financial pressure.
Arrears data alone does not give a clear picture
In 2025 APRA’s arrears numbers dropped sharply, with some categories falling almost to zero. This does not reflect what is happening in households and instead comes from changes in reporting and definitions. Because these arrears figures can shift so much from quarter to quarter they are not the best way to understand financial stress.
Lending behaviour, refinancing patterns, personal loan growth and changes in first-home buyer activity provide a clearer and more reliable view of what is happening across Australia.
Smaller states are showing the fastest rise in pressure
By combining several indicators into one clear score our team at Real Credit Repairers developed a Financial Pressure Index to show how conditions are shifting across the country.
The NT recorded the strongest year-on-year rise at more than 16 percent, and TAS also moved into positive territory, meaning households there are taking on more pressure than in previous years. WA, ACT and NSW saw their index scores fall, but this does not mean stress is easing. In many cases a lower score simply reflects a drop in borrowing activity when affordability becomes too difficult or when households start to pull back.
Why small states often show big swings
One of the helpful insights from the report is that smaller markets can change quickly. NT and TAS have fewer total loans which means even a small increase or decrease can create large percentage movements. This does not make the data less useful, but it means small states need to be viewed with context.
The Financial Pressure Index takes this into account by weighting each state according to its size so that national trends remain balanced and the smaller states do not overshadow the broader picture.
What all this means for everyday Australians
Across the country the signs of financial pressure vary depending on where you live. Some states are seeing strong borrowing growth which can mask underlying strain, while others are experiencing rapid increases in loan sizes. High refinancing levels also show that many households are working hard to manage repayments and rising living costs.
These trends can shape your financial position in several ways, including:
Increased loan sizes making it harder to maintain a financial buffer
Rising personal loan use signalling tighter household budgets
Changes in first-home buyer activity affecting entry-level borrowing
Higher refinancing activity reflecting repayment pressure or cost-cutting
Shifts in borrowing demand influencing how lenders assess risk
If you are managing loans or dealing with credit issues these broader patterns can affect your financial position and your credit score. Understanding what sits behind credit stress can help explain what is happening in the market and why certain changes may appear on your credit report.
(Image: Increasing financial pressure for everyday Australians)
How Real Credit Repairers can help
If you are feeling pressure from credit listings, loan repayments or rising debts it is important to seek support early. At Real Credit Repairers, we help Australians understand their credit reports, dispute incorrect listings and communicate with lenders. Our role is to empower you with clear information and practical steps so you can move forward with confidence.
Access the full report
The full 2019–2025 State-by-State Lending Trends Report is available to download here. It contains detailed charts, commentary and state-level breakdowns for readers who want a deeper dive into Australia’s shifting credit landscape.
If you want help improving your credit or navigating financial stress our team is here to support you.
