CommBank and NAB Tighten Lending as Pressure Mounts on Mortgage Holders

The Australian mortgage market is showing clear signs of strain. Among the major players, Commonwealth Bank of Australia (CommBank) and National Australia Bank (NAB) are tightening their lending practices. We examine what this means for homeowners, potential borrowers and the broader financial landscape, including implications for stocks, stock research and how investors may view Australian banks in relation to global markets and even AI stocks.

Lending Pressure Mounts at CommBank and NAB

CommBank has recently reported a significant increase in its home loan book growth: in the quarter ending September 2025, the bank added $9.3 billion in home loans, equating to a 6.1% rise year-on-year. Meanwhile, CommBank’s internal channel (proprietary lending) made up about 68% of new flows in that quarter, signaling a shift in strategy. 

At the same time, NAB reported that its proprietary channel for home loans increased from 38% to 41% in FY25, while third-party broker channel usage declined. These moves suggest both banks are being more selective in how and through whom they issue loans, with a focus on direct origination and stricter internal controls.

Why Are They Tightening Lending?

Several factors are driving this trend. The housing market has shown signs of overheating, with investor lending rising sharply. For example, CommBank noted investor lending grew 17.6% in Q3 2025 and by 18.7% over the year.  Also, margin pressure is mounting for banks. As borrowing costs and regulatory burdens increase, banks are under pressure to reduce risk and protect profitability. 

Furthermore, regulators have previously emphasised tightening lending standards for high-risk mortgages when the housing market is under stress. Thus, CommBank and NAB appear to be adjusting their strategies to respond to both internal risk assessments and external environment challenges.

What This Means for Mortgage Holders

For current mortgage holders, especially those on variable or interest-only loans, tightening lending can signal caution ahead. If banks foresee risk, they may raise lending criteria, increase serviceability buffers, or shift the mix of products available.
If you are applying for a new loan or refinancing, you may face stricter checks, higher required down payments, or limited product options.

For those already holding mortgages, rising costs or economic stress may combine with lending firms’ increased caution to create a more challenging environment. For instance, one report noted that about 60 % of mortgage holders were experiencing some form of stress. Mortgage repayments may rise, and banks’ stricter lending behaviour may reduce the flexibility for borrowers to switch or refinance easily.

Impact on CommBank, NAB and Stock Research

From an investment perspective, the behaviour of these banks is a relevant signal. For example, if CommBank is tightening lending, then its growth in new loans may slow or become more selective, which could impact net interest margin (NIM), loan growth, and overall profitability.

When analysing bank stocks or broader Australian financial sector stocks, we must factor in the implications of tighter lending. For instance, reduced growth in mortgage volumes may temper future earnings and shareholder returns.

Moreover, in the era of AI stocks and fintech disruption, banks that adapt intelligently may fare better. CommBank is already using more in-house channels and digital tools (such as its “Digi Home Loan” offering) to retain control over distribution. 

Therefore, for investors doing stock research, it’s important to observe not just headline loan volumes but also the quality of lending, the mix between broker and proprietary channels, and the bank’s ability to manage risks in a shifting housing environment.

What We See And What To Watch

We project the following key observations:

• Loan growth may decelerate: Even though CommBank posted growth in the latest quarter, the shift to more selective/proprietary channels may reduce the pace of expansion.
• Margin pressures may persist: With banks shifting towards lower-risk loans, yields may be lower or cost structures higher.
• Borrower stress remains a risk: Many mortgage holders are already feeling the pressure. Combined with rising living costs, this could impact defaults or refinancing behaviour.
• Regulatory risk remains: The housing market remains a macro-vulnerability. Regulators may impose further borrowing constraints if conditions worsen.
• Investor sentiment may shift: For bank stocks and the broader Australian market, lenders becoming more conservative can change growth expectations — this matters for investors, especially those comparing with high-growth AI stocks or global banking peers.

Why This Matters Globally (and in the Age of AI Stocks)

While the story is rooted in Australia, the dynamics echo globally. Banks everywhere are balancing loan growth with risk, and housing is often a key exposure. For global investors tracking AI stocks, fintech disruption or banking sector trends, indications of credit tightening can signal broader economic shifts.

For example, if bank loan growth softens, funding costs may rise, investment may slow, and technology spending, including AI-related spending, may be affected. Thus, the behaviour of major banks like CommBank and NAB can act as a barometer of economic health.

Stock research into Australian bank equities, global peers or AI-enabled fintech firms should incorporate these credit trends. If lenders tighten, it can reduce demand for new homes, dampen consumer spending and affect growth-oriented sectors.

What Should Borrowers and Investors Do?

For borrowers, the key steps are:

• Review your mortgage structure and consider whether you may face higher repayments or reduced flexibility.
• If you are getting a new loan, ensure your serviceability tests are robust and you have a buffer for rates to rise.
• Stay aware of bank policy shifts: if lenders become more cautious, it may reduce product options or increase cost.

For investors, especially those interested in bank stocks or financials:

• Check loan growth versus risk trends: volume may be less important than the quality of lending.
• Examine margin pressures, cost of funds, regulatory changes and channel shifts (broker vs proprietary).
• Consider how broader trends (such as AI stocks, fintech competition, and interest-rate cycles) interact with the banking sector’s credit decisions.

Conclusion

The tightening of lending practices at major institutions such as CommBank and NAB is a significant development. For mortgage holders and those seeking home loans, this means a more cautious credit environment with potential cost and access implications. For investors and analysts, it signals a shift in bank strategy, one that could influence earnings, margins and the broader financial landscape.

By paying attention to these developments, borrowers can position themselves for possible higher hurdles, and investors can refine their stock research in the banking sector while keeping an eye on emerging trends in fintech, AI stocks and global credit conditions.

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Disclaimer:

The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.