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The February cash rate drop did not result in an uptick in home loan activity, according to data released by Loan Market Group.
New data drawn from Loan Market Group’s national broker network of over 6,000 brokers has revealed that home loan demand remained relatively flat in the March quarter 2025, despite the central bank having reduced the cash rate for the first time in four years in February.
According to Loan Market Group data, around $13 billion of mortgages were approved in the three months to March 2025 (when seasonally adjusted and excluding refinances).
While this was up 15 per cent on the same quarter in 2024, the result was actually down 4.5 per cent on Loan Market Group’s February 2025 approvals (which were also down on January figures). This was despite the Reserve Bank of Australia (RBA) having reduced the official cash rate from 4.35 per cent to 4.10 per cent in February 2025.
Noting the figures, Barrenjoey banking analyst Jonathan Mott said that the fall in lending volumes may be a “timing issue” (given the lagged impact of monetary policy) and was also consistent with softer house prices at the beginning of 2025. (Figures from property analytics company CoreLogic, soon to be rebranded to Cotality, showed that prices grew by 0.7 per cent over the March quarter, following a short period of declines).
Mott said that while the interest rate cut “did not stimulate demand”, he expected that the central bank would continue its cutting cycle this year, which would “lead to improved borrowing capacity to support a broad-based lift in housing credit”.
Victorian loan growth lagging behind
The lending data from Loan Market Group has also revealed that the property markets are diverging across Australia.
While the national growth rate averaged at 15 per cent in the March quarter, loan approval volumes were found to have surged in NSW, Queensland, South Australia, and Western Australia. South Australia and NSW recorded the largest rise in approved lending from Loan Market Group brokers in the March quarter, both up 24 per cent on the year.
On the flip side, the southern state of Victoria lagged behind, with just 3 per cent growth.
Looking at the different types of borrowings, the Sunshine Coast and Tasmania led the way for growth in owner-occupier mortgage originations (up 33 per cent on March 2024).
Investor activity was booming on the Sydney coast (up 58 per cent year on year) and in Adelaide (up 50 per cent) as well as the rest of South Australia (up 50 per cent), where house prices are more affordable.
Victoria suffered from a sharp decrease in investor loan activity, particularly in the inner city, where investor approvals dropped 21 per cent year on year. This may be down to state taxes and weak sentiment.
Noting the trends identified in the data, Sam White, the executive chairman of Loan Market Group, said: “Our data shows Australians continue their love affair with property, with loan approvals growing 15 per cent year-on-year in the March quarter. But that momentum is uneven.
“Approvals are up 24 percent in NSW and South Australia, and 21 percent in Queensland, while Victoria is barely moving at 3 percent growth.
“It continues to be a challenging time for home buyers in parts of Sydney and Melbourne, where borrowing capacity has been heavily impacted by the rate hiking cycle.
“We’re seeing strong growth in areas where housing is more affordable, and where buyers are getting more value for their loan.”
Touching on investor trends, David McQueen, CEO of Loan Market, said investors seemed to be feeling positive.
“Investor confidence is growing beyond the capital cities, especially in areas like Perth, coastal Sydney and regional Queensland. That kind of activity doesn’t happen unless buyers see long-term upside and rising rental demand,” he said.
“The next phase of loan growth is likely to come from owner-occupiers re-entering the market as rates fall and confidence improves.
“Our brokers are telling us they’re working with more clients who are chasing lifestyle and affordability and they’re not afraid to move for it.
“Whether it’s regional hubs, outer suburbs or interstate hot spots, people are rewriting the playbook on where they choose to live, invest and raise a family.”
Buyers chasing affordable neighbourhoods
Loan Market Group’s data showed median approved loan sizes have risen sharply in Queensland, Western Australia, and South Australia over the past three years, reflecting heightened buyer competition and larger investor transactions.
For example, the median loan size lodged by Loan Market Group brokers for buyers in Queensland, Western Australia, and South Australia has risen by around $150,000 (to over $600,000 in Queensland, $580,000 in Western Australia, and $560,000 in South Australia).
In contrast, Victoria’s median loan size has remained largely flat, holding just above $500,000.
“The numbers speak for themselves,” McQueen said.
“Buyers are redrawing their maps moving beyond the city fringe into regions that were once considered ‘too far’. It’s a direct response to affordability pressure, but also a mindset shift around what home and investment look like.
“The national story doesn’t hold up at a postcode level. What’s booming in one region is flat in the next and that’s where brokers are playing a critical role.
“In a fragmented market like this, brokers are critical. They’re the ones helping borrowers understand the trade-offs, navigate tighter lending conditions and get a fairer deal on finance.”
[Related: FHB election promises could exacerbate house price problem]
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