Westpac has reported a 20% fall in mortgage applications following Australia’s recent tax changes. The decline highlights growing pressure across the housing market.
Westpac is Australia’s second-largest lender and a major mortgage provider. The bank also expects investor housing credit growth to slow sharply.
Investor credit demand is forecast to fall from 9.1% in 2026 to 4.5% in 2027. It is then expected to reach 4.4% in 2028. The changes have created fresh concerns for banks and property investors.
Higher interest rates are also adding pressure to borrowers. Housing undersupply and population growth may provide some support.
Westpac has reported a 20% decline in mortgage applications following recent tax changes. [Courtesy: Reuters]
Why Mortgage Applications Have Fallen
The mortgage slowdown follows major changes to tax concessions for property investors. The Federal Government scrapped generous investor tax concessions, weakening demand from some buyers. Westpac said housing demand has weakened substantially since those changes.
The decline has also affected other major lenders. NAB reported a 15% fall in mortgage applications during the past three months. Westpac’s latest decline was twice the fall seen after the tax announcement.
The broader market is also showing signs of weakness. Auction clearance rates have reached their lowest level in six years. National average property prices have fallen about 2% over four months. Cotality supplied the property market data.
Westpac Mortgage Demand Drop Australia Signals Banking Pressure
The latest housing data could affect bank earnings and investor confidence. Australia’s major banks rely heavily on mortgage lending for revenue and profitability. The top four banks control more than 70% of Australia’s mortgage market. Westpac therefore faces a significant challenge if housing demand remains weak. Key pressures include:
- Lower mortgage applications could reduce future lending volumes.
- Investor credit growth is expected to slow sharply.
- Higher interest rates could continue pressuring household budgets.
- Property tax changes may reduce investor participation.
These factors could create a tougher operating environment for major lenders. Investors are already watching bank valuations and future earnings closely. Westpac shares fell as much as 5.9% after the quarterly update.
Australia Home Loan Demand Fall 20% Changes The Outlook
Westpac expects total housing credit growth to weaken next year. Housing credit growth is forecast to fall from 6.8% in 2026 to 4.7% in 2027. The bank expects some recovery in owner-occupied credit demand later.
Total housing credit growth could reach 5.2% in 2028. The outlook shows how policy changes and borrowing costs are reshaping demand. Investor credit growth faces the strongest pressure in the forecast.
It is projected at 9.1% in 2026, before falling to 4.5% in 2027. The forecast then reaches 4.4% in 2028. This trend could influence property prices and banking competition.
Housing Supply Could Limit The Downturn
Despite weaker demand, Westpac sees structural support for Australia’s housing market. The country continues to face a significant undersupply of housing. Population growth could also support underlying housing requirements.
Westpac CEO Anthony Miller said these factors may partly offset market pressures. However, households remain under pressure from higher living costs. Higher borrowing costs could further restrict purchasing capacity. Several factors will shape the next phase of housing demand:
- Housing undersupply may support property demand.
- Population growth could sustain underlying housing needs.
- Higher living costs may limit household borrowing.
- Policy changes could discourage some property investors.
Business investment and customer resilience are also supporting broader economic activity.
What The Westpac Results Mean For Investors
Westpac reported quarterly cash earnings of A$1.8 billion for the period ended June 30. That compares with A$1.9 billion during the same period a year earlier.
Its core net interest margin remained broadly stable during the quarter. Lending and deposit books both increased 2%. The bank’s common equity tier 1 capital ratio stood at 12.1%.
That remains comfortably above regulatory requirements, supporting balance sheet flexibility. However, investors remain concerned about future earnings growth.
Analysts expect pressure from weaker lending volumes and margins. Credit quality is another longer-term concern. Westpac shares have also underperformed several banking rivals this year.
Westpac faces weaker lending, margin pressure and rising credit risks. [Courtesy: Kalkine]
Australia’s Big Banks Face A Changing Housing Market
Westpac’s update has also affected sentiment towards other major Australian banks. Commonwealth Bank of Australia, National Australia Bank and ANZ shares each fell more than 2%.
The reaction shows the broader importance of housing demand for banking stocks. Investors have traditionally valued Australian banks for strong property exposure and reliable dividends. That outlook is now facing greater uncertainty.
Westpac expects housing credit growth to slow before improving modestly. Interest rates, tax policy and property supply will remain key market drivers.
The next phase could therefore test mortgage growth across Australia. Banks may need stronger customer activity to offset weaker investor lending.
What Comes Next For Mortgage Demand
The 20% decline in applications provides a clear warning for Australia’s housing market. The key question is whether the weakness continues through 2027.
Westpac expects investor credit growth to fall significantly next year. Yet housing shortages and population growth could provide a partial buffer.
Household spending pressures remain another important factor. Borrowers may become more cautious as living costs remain elevated. Investors will also monitor mortgage volumes, property prices and bank margins.
The latest figures suggest the housing market is entering a more uncertain phase. The impact of policy changes could become clearer over coming quarters. For now, mortgage demand remains under pressure.
Also Read: Rio Tinto And BHP Stock Surge Outlook Firms As Trump Mining Policy Shift Unfolds
Frequently Asked Questions
- Why did Westpac mortgage applications fall 20%?
Westpac linked weaker housing demand to recent tax changes, higher interest rates and market pressures. - What is the 20% fall in Australian home loan demand impact?
The decline could reduce lending growth and create greater earnings pressure for major Australian banks. - What is Westpac’s investor credit forecast for 2027?
Investor housing credit growth is forecast to fall from 9.1% in 2026 to 4.5% in 2027. - Could Australia’s housing market recover?
Housing undersupply and population growth could partly offset higher rates and recent policy changes.
Disclaimer
This article discusses Westpac’s mortgage data, housing forecasts and Australian banking conditions using the supplied Reuters report. It is intended for general information and news analysis only. Forecasts can change as economic conditions, interest rates, housing policies and lending trends evolve. Nothing in this article should be considered financial, investment, property or lending advice. Readers should conduct independent research before making financial decisions.
Source:
- https://www.reuters.com/business/finance/westpac-reports-20-drop-mortgage-applications-after-australias-tax-changes-2026-08-10/
- https://www.afr.com/companies/financial-services/westpac-says-mortgage-applications-are-down-20pc-since-budget-20260810-p60mtf
Luke Carlino is a seasoned Copywriter, Content Strategist, and Social Media Manager specialising in Mining, Finance, and Business journalism. With more than a decade of industry experience, he brings rigorous editorial standards and commercial acuity to every project.
