RBA Warns of Sharp Drop in New Housing Commitments

The RBA flags a 'sharp' decline in new home loan commitments as all four major banks report mortgage application drops of 12-20% since the May budget.

Australia's four major banks have all reported significant drops in mortgage applications since the May federal budget, and the Reserve Bank of Australia is now warning of a "sharp" decline in new housing loan commitments. As reported by The Adviser, the RBA's August Statement on Monetary Policy describes the fall as driven primarily by weaker investor activity — the result of higher interest rates combined with recently announced changes to property investor tax settings, including negative gearing and capital gains tax rules.

A Uniform Decline Across All Major Lenders

The numbers from each of Australia's four major banks tell a consistent story. Westpac reported that the number of mortgage applications declined 20 per cent since the budget. The Commonwealth Bank of Australia (CBA) disclosed a 15 per cent fall in the number of home loan applications between the budget and the end of July, with investor applications specifically down 28 per cent over the same period. National Australia Bank (NAB) said new-loan demand dropped 15 per cent over three months. And Australia and New Zealand Banking Group (ANZ) reported that underlying mortgage application values fell 12 per cent between 12 May and the end of July, when the boost from the government's 5% Deposit Scheme is excluded, with a 5 per cent decline on a quarter-on-quarter basis including all borrower types.

The RBA noted that total credit growth remained relatively stable at 8.6 per cent in six-month-ended annualised terms to June, but warned that housing credit would ease over coming months as declines in housing prices flow through to lending volumes. Housing credit had already eased by around 0.5 percentage points in six-month-ended annualised terms since the RBA's May statement. The central bank also noted that business debt growth had remained strong and "broadly based across industries," with the real estate and industrials sectors contributing significantly.

At the individual lender level, ANZ's home-loan portfolio grew 2 per cent, or $7 billion, from $348 billion at March 2026 to $355 billion at June 2026. However, Suncorp Bank — which ANZ acquired in 2024 and is progressively integrating — saw its mortgage book fall 1 per cent over the same period, from $62 billion to $61 billion. ANZ reported that 45 per cent of integration activities had been completed by June 2026, with the bank on track to complete a "safe and secure migration" of Suncorp Bank customers to ANZ by June 2027.

ANZ posted a cash profit of $1.9 billion for the three months to 30 June 2026, up 2 per cent on the same quarter of the prior year. Revenue was flat over that period, while group net interest margin improved by 1 basis point to 1.54 per cent.

ANZ Revises Its Housing Price Forecasts Down

ANZ has separately cut its housing price outlook, stating that the market "has softened a little more than we were expecting." The bank now projects that capital city dwelling prices will decline 4.3 per cent in 2026 and a further 3.4 per cent in 2027, implying a peak-to-trough fall of 10.6 per cent.

Sydney is forecast to experience the deepest correction at 14.5 per cent peak to trough, followed by Melbourne at 12.8 per cent, Adelaide at 9.8 per cent, Brisbane at 7.9 per cent, and Perth at 5.2 per cent. ANZ described Adelaide as "more exposed, due to affordability constraints and supply and demand being more in balance than Perth and Brisbane."

For investors, the credit forecasts are equally significant. ANZ expects investor housing credit growth to slow from 10.2 per cent year on year in the June 2026 quarter to -0.8 per cent by early 2028. Owner-occupier credit growth is projected to trough at 3.7 per cent, while total housing credit growth is forecast to slow from 7.5 per cent in the second quarter of 2026 to 2.2 per cent by the first quarter of 2028.

If you hold investment property, now is a practical time to review your portfolio against these revised assumptions. Our investor home loans page outlines the current landscape, and our borrowing power calculator can help you model your specific position.

First Home Buyers: The One Segment Holding Up

Not all segments are moving in the same direction. ANZ's disclosure confirms that government-backed first home buyer activity helped offset broader softness in application volumes: when the impact of the 5% Deposit Scheme is included, ANZ's overall mortgage application values for the quarter were broadly unchanged from the prior period.

The RBA also noted that household balance sheets had remained resilient, with "strong" historic flows into offset and redraw accounts meaning many borrowers hold meaningful repayment buffers. The central bank did flag that additional mortgage payments into those accounts declined slightly in the June quarter, suggesting the buffer-building phase may be moderating.

For first home buyers, a market where investor competition is pulling back can open up opportunities that were difficult to access during the pandemic upswing. The data confirms the government's first-home buyer initiatives are continuing to provide a pathway even as the broader market contracts.

The RBA held the cash rate at 4.35% at its August meeting and has signalled it will remain data-dependent. With CPI at 3.8% in the 12 months to June 2026 and unemployment holding at 4.4%, the path to rate cuts is unlikely to open before 2027 according to most major bank forecasts. For anyone sitting on a mortgage that has not been reviewed recently, benchmarking your current rate against what is available in the market is a sensible step — our refinance home loans page shows what is currently on offer.