CBA has revealed how it has broken down its mortgage book into three stages of credit risk.
One of Australia’s biggest banks is monitoring 1 in 13 mortgages it flags as higher-risk – valued at around $61.9 billion – as APRA imposes new lending limits.
The Commonwealth Bank’s half-year report to December 31, 2025, offers rare insight into how it monitors and manages credit risk, particularly within its higher-risk loan segments.
The figures come as mortgage lending across the country continues to climb, with Canstar citing ABS data showing $108.3 billion in new home loan commitments in the December quarter, including $43 billion in investor lending (up 7.9 per cent) and $19.3 billion for first-home buyers (up 15.5 per cent).
From February 1, banking regulator the Australian Prudential Regulation Authority imposed new limits on high debt-to-income lending, saying such loans were “trending up” and needed to be contained to strengthen household resilience.
The limit allows up to 20 per cent of new mortgage lending by authorised lenders to be at a DTI greater than or equal to six times income – to “manage the possible build-up of risk in housing credit by setting guardrails” for banks to work within.
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CBA is keeping a close watch on its stages 2 and 3 category home loans. Picture: Lisa Maree Williams/Getty Images
CBA’s half-year report broke down its mortgage portfolio into Stage 1 performing loans ($762.8 billion), Stage 2 higher-risk performing loans – those with a significant increase in credit risk, based on internal credit ratings and other indicators like arrears ($54.3 billion), and Stage 3 non-performing loans ($7.6 billion).
The higher-risk Stage 2 and 3 mortgages make up roughly 7.5 per cent of the total home loan figure – a level that has held steady since 2024. The more concerning Stage 3 loans account for less than 1 per cent of the bank’s total.
The CBA report said the bank makes “key judgements in determining expected credit loss, including assessing when a significant increase in credit risk has occurred, selecting and forecasting forward-looking macroeconomic scenarios, assigning probability weightings, and applying experienced credit judgement,” underlining its careful approach to managing higher-risk Stage 2 mortgages and the broader loan book.
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Compare the Market’s economic director David Koch. Picture: Michael Willson/AFL Photos via Getty Images.
On the borrower side, Compare the Market’s economic director David Koch said new homebuyers have to grapple with higher repayment costs as average loans surge to record highs.
He found monthly repayments on an average $736,000 loan reached as high as $4,037, even at a competitive rate of 5.19 per cent.
“When the roof over your head becomes one of your most volatile expenses, every other part of the budget starts to buckle,” Mr Koch said.
“Add rising rental costs and mortgages on top of rising insurance premiums, growing grocery costs, soaring energy bills, and you’ve got a pretty heavy financial burden to carry.”
Mr Koch said “property values continue to rise, making the dream of homeownership even harder to chase. New government deposit schemes have helped lower the first hurdle.”
According to Australian Bureau of Statistics data for the December quarter 2025, first-home buyer loans rose 6.8 per cent to 31,783 – its largest quarterly increase since December 2023 – with the average loan reaching $607,624.
Investors almost doubled the number of new loans compared to FHBs, rising 5.5 per cent to 60,445, with an average loan size of $716,711.
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bRight Agent founder Aaron Scott (right).
But bRight Agents co-founder Aaron Scott has raised concern that borrowers with smaller deposits may be charged higher interest rates than those with larger ones. He said banks are “benefiting enormously from government schemes.”
“With investors almost doubling first-home buyers, young Australians are being squeezed out of key markets,” he said. “Even with government incentives, it’s harder for new buyers to compete and get a foot on the ladder.”
The CBA data released Wednesday showed actual defaults are not rising sharply, with home loan arrears falling 0.07 per cent, 87 per cent of borrowers ahead in their scheduled repayments, and its loan impairment expense for the half-year falling to $319 million.
CBA’s impairment provisions reported as at December 31, 2025 cover its entire portfolio – not just new mortgages written during the half-year – with home loan provisions totalling $1.01 billion for Stage 1, $656 million for Stage 2, and $408 million for Stage 3.
The bank’s half year result saw shareholders delivered an interim dividend of $2.35 per share, equating to around $4.4 billion to be paid out on March 30, 2026.
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