Mortgage lending slumps $5.4bn as rate hikes and tax changes bite

ABS data shows new home loan settlements fell to $97.6bn in the June quarter — the second consecutive quarterly drop in over three years.

New lending records back-to-back quarterly falls

New data from the Australian Bureau of Statistics confirms what many mortgage brokers have been feeling on the ground: the combined weight of three consecutive interest rate rises and the federal government's May budget property tax changes has produced the sharpest sustained decline in new mortgage commitments in more than three years.

Total new housing loan settlements reached $97.6 billion in the June 2026 quarter — a 5% decline in seasonally adjusted terms from the March quarter. It was the second consecutive quarterly drop, the first back-to-back fall since 2023. As MPA Australia reports, that sustained softening sets this period apart from the isolated dips seen in earlier rate-hike cycles.

The retreat was broad but uneven. Investors drove the majority of the dollar decline, with new investor loan commitments falling $4.2 billion — a 10% drop that was the steepest quarterly fall in dollar terms since 2015. Owner-occupier lending fell a more modest $1.2 billion, or 2%, over the same period. Despite the quarterly falls, both segments remained above their levels from a year earlier.

Property Investment Professionals of Australia (PIPA) chair Cate Bakos attributed the investor pullback to borrowing capacity, not just confidence. The removal of negative gearing on established dwellings purchased after 12 May 2026 — effective 1 July 2027 — has materially reduced the income offset that made many investment loans serviceable. "This isn't about sentiment. It's about maths," Bakos said. PIPA estimates established property investors outside SMSFs have "pretty much left" the market since budget night.

Major bank application data confirms the trend

The ABS figures align with application data separately reported by Australia's four major banks:

- **NAB** recorded a 15% fall in home lending applications in the June quarter compared to the March quarter, and was 16% below the same period a year earlier. Investor applications declined 17%, and owner-occupier applications fell 14%. - **CBA** reported a 15% fall in new residential mortgage applications since 12 May. - **Westpac** recorded an average 20% drop in applications between 15 May and 31 July compared to the prior quarter, with investor applications down 26% post-budget. - **ANZ** reported applications fell 12% between the May federal budget and the end of July.

These movements are not isolated. A simultaneous pullback across all four majors over the same compressed window points to a structural demand shift, not bank-specific issues.

Loan sizes are also adjusting. The national average new owner-occupier loan fell for the second consecutive quarter, declining $4,000 to $731,000. NSW retains the highest average at $842,000, despite a $19,000 quarterly fall. Victoria edged down to $664,000. In contrast, Queensland, South Australia, Western Australia, and the Northern Territory each recorded record-high average loan sizes — a sign that some markets are still advancing even as the national picture softens.

Data insights director Sally Tindall observed that refinancing remains elevated despite the broader slowdown: "The value of refinanced loans clocked in at the third highest level in the ABS records as borrowers seek out relief from rising rates." Total refinanced loans reached $67.1 billion in the June quarter in seasonally adjusted terms — down 2% from the record high set in March, but still the third-highest level on record.

What borrowers should do now

The softening market has a practical upside: lenders are competing harder for the borrowers who are active. When new applications fall, competition for refinancers and ready purchasers intensifies. Use our refinance savings calculator to see how much you could save by switching, or compare the cheapest home loans currently available against your existing rate.

If you are considering a purchase, less competition at auction is translating to moderated prices in Sydney and Melbourne. In markets like Queensland and Western Australia, prices remain at records but growth is beginning to wobble. A clear picture of your borrowing capacity is the right starting point — our borrowing power calculator can provide a baseline before you speak to a lender.

Bendigo Bank's chief economist David Robertson noted that the RBA's August hold at 4.35% came with hawkish signals, and the bank retains its forecast of a further rise in November. Variable rate borrowers should model their repayments under a further 25 basis point increase before assuming the current rate is the floor.