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Australia Warns Banks Not to Ease Mortgage Rules Amid Rising Loan Competition

By  |  November 20, 2025

Australia’s top banking watchdog is urging major lenders to resist loosening mortgage criteria, warning that a race for home-loan customers could heighten risks just as interest rates begin to edge lower.

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    According to a statement from the Australian Prudential Regulation Authority, a recent system-wide stress test showed that banks and superannuation funds would remain robust even if confronted with a year-long financial shock. The modeled downturn included scenarios involving heightened geopolitical tensions, persistent inflation, climate-related disruptions and significant cyber incidents.

    APRA said the strong results reflected the financial sector’s current resilience, but also emphasized that this stability rests on lenders maintaining disciplined credit practices. The regulator highlighted the nation’s substantial household debt as a structural vulnerability, noting that mortgage exposures dominate the balance sheets of many institutions.

    Per a statement accompanying the test results, any move by banks to ease lending standards in an effort to boost market share could weaken the system’s defenses if a sharp economic slowdown were to occur. The watchdog warned that even in a competitive environment, banks must prioritize sound underwriting to ensure the financial system remains resilient in the face of potential shocks.

    Source: Investing Live