Budget and Rate Hikes Crush Investor Lending in June Quarter

ABS data shows investor home-loan commitments fell 8.6% in June 2026 — the steepest drop in nearly four years — as rate rises and budget changes bite.

Australia's home-loan market hit its softest patch in years during the June quarter of 2026, with new Australian Bureau of Statistics (ABS) figures showing 134,225 new dwelling loan commitments — a broad fall across every borrower type. Investors absorbed the sharpest blow, recording their biggest quarterly drop since September 2022, while first home buyers and owner-occupiers also pulled back. The Adviser reports the data points to an unmistakable shift in borrowing conditions with real consequences for anyone planning their next property move.

ABS head of finance statistics Mish Tan attributed the quarterly deterioration to two converging forces: interest rate movements and policy change. "Lending conditions continued to change in the June quarter, with the Reserve Bank of Australia increasing the cash rate for the third time in 2026. Changes to negative gearing and capital gains tax were also announced in the federal budget in May, to commence in July 2027," she said.

Investors Feel the Biggest Pinch

The investor segment recorded an 8.6 per cent drop in new loan commitments in the June quarter, with the total value of investor lending falling 10.2 per cent to $37.1 billion. That is the steepest quarterly decline since September 2022, and it occurred despite investor lending sitting 2.8 per cent higher than a year earlier — the annual growth rate had been running at 19.4 per cent in the March quarter.

State-by-state, the retreat was concentrated in the largest property markets. NSW saw investor commitments fall 15.5 per cent in the quarter, Victoria fell 14.2 per cent, and Queensland dropped 10.1 per cent. Some smaller markets offered partial offsets — the Northern Territory rose 12.8 per cent, the ACT lifted 8.7 per cent, and Tasmania gained 5.3 per cent — but these were nowhere near enough to change the national direction.

The trigger is partly psychological and partly mathematical. The federal budget's announcement of changes to negative gearing and the capital gains tax discount — both due to take effect in July 2027 — appears to have prompted many investors to reassess their numbers ahead of those changes. Combine that with three RBA cash rate increases during 2026, and the arithmetic of property investment shifted materially over the six months to June.

If you hold investment property or are considering buying, now is a good time to use the borrowing power calculator to stress-test what a further rate movement does to your position. You should also review whether your current rate is still competitive against what is available across investor home loan options.

Owner-Occupiers and First Home Buyers Also Pull Back

Owner-occupier commitments declined 3.3 per cent to 81,626 in the June quarter, with the total value of new owner-occupier lending falling 1.9 per cent to $60.5 billion. First home buyer commitments fell 2.9 per cent to 29,319, although the dollar value of FHB lending edged 0.2 per cent higher to $18.4 billion — suggesting those who did borrow were borrowing slightly more.

Refinancing activity also eased. Internal owner-occupier refinances fell 7.4 per cent to 43,848, while external owner-occupier refinances dropped 0.9 per cent to 66,449. Investor refinancing showed a similar pattern, with internal investor refinances falling 5.6 per cent to 15,331 and external investor refinances declining 2.3 per cent to 36,597.

If you are unsure whether refinancing makes sense at your current loan-to-value ratio, the refinance savings calculator can give you a clearer picture of what you might save by switching lenders.

The Numbers Have Only Got Worse Since June

The ABS figures cover April to June 2026, and more recent data suggests the slowdown has deepened.

Equifax recorded a fourth consecutive monthly annual fall in mortgage demand in July, with demand 16.4 per cent lower than a year earlier. First home buyer demand fell 19.1 per cent annually in July, following a 20.9 per cent decline in June.

The major banks' own figures tell a consistent story. Westpac reported that average monthly mortgage applications fell 11 per cent quarter on quarter to 29,000 in the third quarter of 2026, with its post-budget run rate dropping to 26,000 per month — 20 per cent below the second-quarter level. Investor applications were down 26 per cent following the budget, compared with an 18 per cent fall in owner-occupier applications. The Commonwealth Bank of Australia reported mortgage applications were 17 per cent lower in June than a year earlier, with investor applications down 28 per cent since the May budget and owner-occupier applications down 9 per cent. ANZ recorded a 12 per cent fall in mortgage applications between 12 May — the day of the federal budget — and the end of July.

Large broker groups reported similar trends. Lendi Group CEO Sebastian Watkins said Aussie Home Loans data showed first home buyer lodgements declined more than 20 per cent since the budget announcement, while investor lodgements declined more than 25 per cent. Loan Market executive chairman and CEO Sam White reported first home buyer loan applications fell 16 per cent in June compared with the four weeks before the budget, with investor applications falling 19 per cent over the same period.

What This Means for You

A softer market creates different opportunities and risks depending on your position.

For first home buyers, reduced competition can mean less pressure in some markets — particularly outside the major capitals. It is worth comparing options across first home buyer home loans to understand what you can qualify for under current serviceability rules.

For investors, the budget's tax changes are not yet in effect and the market is moving fast. If you are weighing whether to act before or after July 2027, that is a conversation worth having with a broker who can run the numbers specific to your situation.

For existing borrowers, the easing in refinancing volumes does not mean refinancing is off the table — it may simply mean fewer people are shopping around at the right time. Use the cheapest home loan comparison to check whether what you are paying today still makes sense against the current market.