Rate Hikes Drive Average Loans Past $696K as Confidence Slumps

Half of prospective buyers say rate rises have shaken their confidence, while average loan sizes climbed nearly 11% in a year.

Half of prospective property buyers in Australia now say rising interest rates have reduced their confidence to purchase — a sharp jump from 35% just one quarter earlier. At the same time, the size of loans people are actually taking out has surged, with the national average climbing nearly $68,000 year-on-year.

These findings come from [MPA Australia](https://www.mpamag.com/au/news/general/rate-rises-leave-buyers-less-confident-and-taking-on-larger-loans-mortgage-choice/574559), reporting on Mortgage Choice's Home Loan Report for the March 2026 quarter. The report draws on home loan submission data and a nationally representative survey of 1,000 consumers conducted in March 2026 by Honeycomb Strategy.

Confidence Falling, Loan Sizes Rising

"Consecutive rate hikes this year have shaken confidence, with 50% of prospective buyers saying that interest rates are making them feel less confident to buy — a significant jump from 35% the previous quarter," said Anthony Waldron, chief executive of Mortgage Choice. "With each new hike, buyers are having to reassess their property plans, and find new approaches to saving and planning."

The national average loan size reached $696,443 in the March 2026 quarter — an increase of $67,759, or 10.8%, compared with the same quarter a year earlier. Borrowers are stretching further to purchase the same property, even as their confidence in making that call is falling.

The growth in loan sizes is running fastest outside Sydney and Melbourne. South Australia and the Northern Territory saw the highest annual jump: the average loan size climbed $105,117 to $694,633 — a rise of 17.8%. Queensland and Western Australian borrowers also lifted substantially, with average loan sizes rising by more than $80,000 in both regions. Queensland's average reached $671,620 (up 13.9%), while Western Australia came in at $640,375 (up 15.2%). New South Wales and the ACT, where absolute values are already highest nationally, saw more modest growth of 5.4%, reaching an average loan size of $767,910.

If you want to see how a loan of this size translates into monthly repayments at the current rate, the [repayment calculator](/calculators/repayment) will give you a quick estimate.

Spending Cuts Are Becoming the Norm

The survey also tracked what buyers and existing borrowers are doing to cope, and the data paints a consistent picture of financial pressure.

Four in five prospective buyers have cut their spending to save for a deposit — a rise of 10 percentage points compared with the previous quarter. For existing borrowers, two in three have reduced their spending to meet mortgage repayments.

The most common cutbacks cited were eating out less (37%), reducing non-essential purchases (34%), cutting entertainment expenses (34%), postponing or cancelling holidays (28%), reducing spending on groceries or household essentials (27%), and driving less to save on fuel (26%).

"A year ago, the proportion of buyers and borrowers having to make sacrifices to save up their deposit or manage their mortgage was trending down," Waldron said. "Now, sacrifices are trending up for both borrowers and hopeful buyers."

For first home buyers in particular, the report paints a two-speed picture. Almost half of first home buyer respondents (45%) expect to receive financial assistance from their parents — whether through deposit contributions, acting as guarantors, or co-purchasing alongside their children. Those without family backing face a starkly different journey: 36% of prospective buyers expect it will take five or more years to save a deposit, while 31% expect it will take less than two years.

If you're navigating this without family support, understanding what [home loan products are available for first home buyers](/home-loans/first-home-buyer) can help you identify grants, schemes and lender options that might close some of that gap.

What to Do With This Information

**If you're saving for your first home:** The most useful thing you can do right now is get clarity on your actual borrowing capacity. Use the [borrowing power calculator](/calculators/borrowing-power) to see what lenders would currently approve based on your income and expenses. The number may be lower than it was six months ago, and knowing your ceiling before you start searching for properties saves time and frustration.

**If you're an existing borrower cutting back to keep up:** Review your loan. Your current rate may not be the best available. On a loan of $696,000, even a modest improvement in rate makes a meaningful difference over a 30-year term. A broker conversation about what's available in the market could be worth your time.

**If you're a prospective buyer feeling uncertain about timing:** Waldron noted that "for those who are already in a position to purchase, the market conditions may work in their favour" — meaning softer confidence has reduced competition in some segments. That's only an advantage if your own serviceability is genuinely solid and you have your pre-approval in order.

The data from this report does not suggest conditions will ease in the short term. The best position to be in is an informed one — with realistic numbers and a clear picture of what you can actually borrow and comfortably repay.