Commonwealth Bank of Australia (CBA) has issued a clear warning: demand for home loans has surged to unsustainably high levels. According to its CEO, Matt Comyn, this rapid credit growth risks stoking property price inflation and increasing financial instability over the long term.

Explaining the Surge in Mortgage Demand

CBA’s comments come amid a strong rise in housing credit. In the third quarter of 2025, new home loan pre-approvals jumped 12% compared to last year after recent interest rate cuts, according to the bank. Meanwhile, its outstanding mortgage portfolio grew by 6.1% in the year ending June 2025, reaching A$664.7 billion. Much of this growth was driven by investor lending, which exploded by 17.6% in Q3 alone. These dynamics suggest that not only owner-occupiers, but also large-scale property investors, are rushing to take advantage of looser borrowing conditions.

Risks, Regulation, and the Cost of Credit

CBA’s leadership says this pace of growth may exceed what regulators find sustainable. CEO Comyn told a parliamentary hearing that a slower rate of credit growth would better support long-term financial stability, equitable access to housing, and manageable risk levels. He flagged concern that current loan growth could strain capital and lead to problems if lending standards deteriorate. At the same time, CBA is navigating tighter credit risk: default provisioning remains a priority, and the bank is signaling that its capital and lending strategy may need to adapt if housing valuations or regulatory expectations shift.

Implications for Homebuyers and the Housing Market

For prospective homebuyers, CBA’s warning underscores the tension between cheap borrowing costs and worsening affordability. Despite cuts to the cash rate, housing remains expensive: CBA economists project home prices could rise by another 6% in 2025 and 4% in 2026. That said, not all households may benefit equally. Rising debt and pricing pressure disproportionately affect first-time buyers, especially as investor competition intensifies. The bank’s call for a more measured credit expansion reflects concern that the market may be overheating and could leave more vulnerable buyer segments exposed.

CBA also expects that policy rates will remain around 3.6% through 2026, citing persistent inflation risks. If true, such a scenario could simultaneously rein in investor-driven mortgage demand while keeping borrowing more costly for average households.

Looking ahead, investors and regulators will watch closely how CBA balances its lending ambitions with financial stability. Key indicators to monitor include future growth in housing credit, shifts in investor versus owner-occupier loan volumes, and default trends. For policymakers, the challenge will be managing credit supply without choking off access to the housing market — particularly for first-time buyers who are already feeling the squeeze.