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RBA Advises Caution in Lending Practices Amid Improved Borrower Finances

Balancing Financial Health with Responsible Lending in Australia's Economy

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

The Reserve Bank of Australia (RBA) has issued a cautionary note to financial institutions, advising them to maintain prudent lending practices despite improvements in borrower financial health.

Recent data indicates that the proportion of mortgage holders spending more than they earn has decreased to approximately 3%, down from 5% in mid-2024.

This improvement is attributed to factors such as tax cuts and easing inflation.

However, the RBA warns that further reductions in interest rates could lead to inflated house prices and a surge in borrowing, potentially introducing vulnerabilities into the housing market. The central bank emphasises the importance of sound lending standards, including serviceability buffers, to protect the market from potential risks.

Victoria has been identified as the state experiencing the most mortgage pressure, attributed to larger loans and smaller savings buffers among its residents. The RBA's review underscores the need for financial institutions to exercise caution in their lending criteria to ensure the continued stability of Australia's housing market and overall financial system.

Published:Monday, 5th Jan 2026
Author: Paige Estritori

Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.

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