Australian lenders urged to stay alert as credit default risk rises
Lenders are being urged to closely monitor both new customers and existing borrowers after fresh data based on millions of credit-active Australians from illion, an Experian company, shows credit default risk is climbing again, particularly amongst vulnerable borrower segments.
The June 2025 edition of the Consumer Stress Barometer reveals that after a period of relative stability, financial stress indicators are once again showing signs of strain. The proportion of Australians at risk of credit default increased by 3.8% in the first half of 2025, reversing previous declines. Renters, young families and those on lower incomes are emerging as the most exposed groups, facing mounting pressures due to rising living costs, shrinking buffers, and limited access to relief.
While household savings declined by 4.5% nationally since January, the erosion has been more pronounced among renters, with the report finding that renters are bearing the brunt of inflationary pressure. For non-homeowning households, rents rose by 6.8% in the first half of 2025, well above average wage growth which sat at 4.2% according to ABS figures. Among low-income families with children, the figure was closer to 10%.
In parallel, the credit default risk for households with dependents rose by 6.3%, almost twice the national average. Among 25–39-year-olds, credit card delinquency also spiked by 8% as households increasingly rely on revolving credit to manage essentials like food, fuel, and rent.
“The latest figures should serve as a clear warning to lenders,” said Barrett Hasseldine, Head of Modelling at illion. “While mortgage holders may be seeing some stabilisation, default risk is quietly rising again, particularly among borrowers with no property equity, limited savings, and rising debt commitments. It’s essential that lenders continuously profile and reassess borrower risk, not just at the point of onboarding, but throughout the lifecycle of a loan.”
“Many young families are being stretched financially,” added Hasseldine. “They’re juggling rising costs with limited buffers and often turning to credit to stay afloat. The challenge for lenders is how to proactively identify and support these borrowers before they fall into arrears.”
The power of proactive customer management in reducing risk
With credit stress on the rise and economic recovery unevenly distributed, the report calls on financial institutions to take a more proactive stance in identifying and managing risk.
“From our perspective, continuous credit health monitoring is no longer optional—it’s essential,” said Hasseldine. “Lenders need to be equipped to detect early warning signs and ensure support is offered early.”
To meet this challenge, lenders are encouraged to enhance borrower profiling and adopt dynamic, data-driven risk assessment strategies. By leveraging real-time data, AI-powered analytics and flexible decisioning tools lenders can:
- Identify at-risk customers early through continuous credit health monitoring
- Tailor support strategies based on individual borrower profiles and financial behaviour
- Adapt more quickly to changing economic conditions with agile, testable decision models
- Reduce operational costs while improving customer outcomes and portfolio resilience
By integrating these capabilities, lenders can not only mitigate risk but also build stronger, more supportive relationships with their customers, especially in times of uncertainty.
