Australian home lending falls 15.5% in record quarter

15.5% was the quarterly fall in the value of new Australian home loans in the September quarter, as a retreat by property investors produced the largest decline on record. Total lending fell to A$81.16 billion (US$55.6 billion), according to the ABS data reported by Business Times.

The 15.5% decline was the largest quarterly fall since the data began being collected in late 2002 and marked the third consecutive quarterly decrease. The ABS attributed the record drop to a sharp contraction in lending to property investors. The data were released on Wednesday and pointed to pressure from higher borrowing costs and tax-policy changes aimed at curbing property demand.

"the potential impacts of tax changes and expectations of lower house prices." — Mish Tan, head of finance statistics at the ABS

Which tax rules are changing?

Investors are facing two announced changes to the tax treatment of residential property. In May, the Australian government said the capital gains tax discount would be scrapped from July 2027. It also said negative gearing, which allows investment losses to be offset against taxable income, would be banned on existing housing.

The government said these tax breaks had been blamed for inflating house prices in Australia. The capital gains discount change was scheduled for July 2027, while the negative-gearing change applied to existing housing.

Rule or condition	Before	After
Capital gains tax	Government policy included a capital gains tax discount	The discount will be scrapped from July 2027
Negative gearing on existing housing	Investment losses could be offset against taxable income	A ban was announced for existing housing
Central bank interest rates	Five increases came during 2026	Rates reached their highest level in 18 years

Readers checking a purchase or financing plan should review:

Whether the property is intended for owner occupation or investment, because the two categories recorded different lending trends.
The current interest rate and available lending terms offered by a lender.
Which tax treatment applies to the intended transaction and how its timing relates to the announced July 2027 change to the capital gains tax discount.

How did borrowers and investors differ?

The number of new loans also dropped 15% during the quarter. Owner-occupier loans fell 5.3% by value, while loans for investment properties dropped 32.3%.

Commonwealth Bank said its home loan applications were down 16% in the September quarter from a year earlier, according to MarketScreener.

The broader banking picture was also weak: Australia’s major banks reported steep falls in home-loan applications. The Commonwealth Bank figure was for the September quarter and compared applications with the same quarter a year earlier.

Higher borrowing costs formed part of the pressure on investors. Five interest rate increases by the central bank during 2026 took rates to their highest level in 18 years. The ABS also linked investor activity to the possible effects of the tax changes and expectations of lower house prices.

Property prices have fallen for seven months, which Cotality described as the biggest downturn in decades. The lending figures therefore coincided with weaker investor demand, increased borrowing costs and a changing tax framework.

What does the decline mean for property buyers?

The clearest difference was between owner-occupier and investor lending. Although owner-occupier borrowing declined by 5.3% by value, the contraction for investment properties was 32.3%. Commonwealth Bank of Australia’s 16% fall in applications from a year earlier also pointed to weaker demand across the wider home-loan market.

For financing comparisons outside Australia, related reporting covers flood risk in England’s mortgage market and U.S. mortgage rates and declining demand.

Mish Tan said the figures reflected higher borrowing costs, the potential effects of tax changes and expectations of lower house prices, placing the investor retreat alongside both financing pressure and policy uncertainty.