Australia home loans in record quarterly slump

Australian home lending posted a record decline in the September quarter of 2026, highlighting rapidly weakening borrowing demand. The value of new home loans fell 15.5% between the second and third quarters to 81.2 billion Australian dollars, the largest quarterly fall since the data series began in 2002. The number of new home loans declined 15.0% over the same period, confirming a broad pullback in housing finance activity.

Data from the Australian Bureau of Statistics show that the fall in lending was broad-based across borrower types. However, the reduction was particularly pronounced among property investors, who sharply reduced their presence in the housing finance market. Owner-occupier borrowing and first home buyer activity also softened, but to a lesser extent than investors.

Investor loans led the downturn in the September quarter. The value of new investor home loans dropped 32.3%, while the number of new investor loans plunged 30.6%. By comparison, the number of new loans to owner-occupiers fell 5.3%, and loans to first home buyers decreased 8.6% in the quarter, leaving first home buyer lending 12.3% lower than a year earlier.

The ABS noted that lending activity declined across all borrower groups but emphasized that the fall was sharpest for investors. ABS head of finance statistics Mish Tan said investor activity appears to be influenced by factors beyond higher borrowing costs, including the potential impacts of tax changes and expectations of lower house prices.

The lending slump is occurring alongside a pronounced housing price correction. Figures released by property data firm Cotality show the national median house price fell 1.2% in October, marking the seventh consecutive month of decline. From its March peak, the national median has dropped 6.7%, reducing the value of the median dwelling by 63,400 Australian dollars.

Cotality characterised the current downturn as the fastest in around 40 years. The firm’s research director, Tim Lawless, linked the decline to headwinds including interest rate hikes, persistently low confidence, cost-of-living pressures and a federal government move to wind back tax concessions for property investors.

Monetary policy tightening has added to pressure on the housing market. On 3 November 2026, the Reserve Bank of Australia raised its key interest rate by 0.25 percentage points to 4.85%, its fifth increase in 2026 and the highest level in 18 years. The country’s major consumer banks subsequently passed the rate rise through to customers with variable-rate home loans.

In this environment, the Commonwealth Bank of Australia reported that the proportion of home loans with payments more than 90 days overdue rose by seven basis points to 0.80%. The bank also disclosed that new home loan applications were 16% lower than a year earlier, even as it delivered an unaudited cash profit of 2.8 billion Australian dollars for the third quarter, up 8% year-on-year. Chief executive Matt Comyn said higher inflation and interest rates are placing uneven pressure on household incomes and business activity, while noting ongoing support from low unemployment and strong investment pipelines.

The combination of record declines in new lending, an accelerated fall in house prices and rising interest rates underscores a rapid shift in Australia’s housing finance conditions. Investor withdrawals are reducing investor presence in the housing finance market, while simultaneously amplifying the overall contraction in credit.