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Loan Market’s latest Mortgage Trends Report, which tracks rolling two-week mortgage lodgement data across its broker network, found mortgage applications had fallen 26 per cent by volume and 23 per cent by value between early February 2026 and the end of June.
While lending activity has eased in recent months, the aggregator said volumes remain above longer-term averages.
The report comes after three Reserve Bank cash rate increases this year and the federal government’s changes to negative gearing and capital gains tax, which Loan Market said had contributed to the reshaping of borrower behaviour across key segments.
FHB demand slows, investor demand splits
First home buyers and investors recorded the largest declines over the period.
Loan Market’s data showed first home buyer mortgage lodgements fell 23 per cent by number and 19 per cent by value, while investor lending declined 31 per cent by number and 35 per cent by value.
Owner-occupier upgrader activity proved more resilient, falling 14 per cent by number and 15 per cent by value.
Loan Market’s executive chairman and CEO Sam White said higher borrowing costs and affordability pressures had weighed heavily on first home buyers.
“First home buyers have been greatly impacted by the three cash rate increases this year, which have reduced their borrowing capacity,” he said.
“Combined with the average house price now exceeding $1 million and the higher cost of living, repayments are becoming more unmanageable.”
While investor activity softened overall, the data suggests some investors are redirecting their attention rather than exiting the market altogether.
Investor mortgage lodgements for new homes were down 15 per cent since early February, compared with a 40 per cent decline for existing properties.
Loan Market acknowledged that the bulk of this drop in new home demand was due to the volatility of the series and only fell during the last few weeks of June.
On a year-on-year basis, new-build investor lending remained 25 per cent higher, while lending for existing homes was down 26 per cent.
White said the budget’s tax changes were influencing where investors were choosing to buy.
“New builds have historically been popular with first home buyers, particularly because several states offer schemes that make them more appealing,” White said.
“With the tax changes announced in the federal budget, investors are now also moving toward new builds. This has increased competition without a likely increase in supply in the near future.”
Upgraders prove more resilient
Upgrader demand remained comparatively resilient throughout the period, with Loan Market suggesting the softer property market has created opportunities for existing home owners.
White said slowing price growth and increased equity positions were helping many borrowers make the move.
“The slowdown in house price growth and competition has presented an opportunity window for upgraders,” White said.
For aggregator Australian Finance Group (AFG), upgraders accounted for 44 per cent of the aggregator’s residential mortgage lodgements in its record June quarter – a level reached only twice before over the past decade, in 2018 and 2022.
White added borrowers were also taking a more considered approach to upgrading, with brokers increasingly helping clients navigate the timing of buying and selling.
“Brokers are having conversations with customers at the moment about timing the purchase and sale of their properties, with bridging loans being a popular choice,” White said.
Recovery hinges on rates
Looking ahead, White said he expects investor activity to recover as borrowers adjust to the new tax settings, although future lending activity is likely to remain tied to the interest rate outlook.
“As the dust settles on the tax changes for investors, I do think many will return to market with new strategies. If price growth continues to decline in some areas, this could also make it more achievable for first home buyers to enter the market,” White said.
“A key factor that will impact future activity is the cash rate – if this increases we will likely see another dip in buyers as borrowing capacity takes another hit. Any cash rate reductions could see potential borrowers gain confidence to enter the market.”
The Reserve Bank’s next cash rate decision is on Tuesday, 11 August.
[Related: The latest lender changes at a glance]
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