- Demand for new home loans has seen a 'significant decline' in May
- Mortgages to first home buyers led the plunge, according to Equifax data
- Refinance activity also saw a considerable drop
Data from credit reporting agency Equifax shows first home buyer loans in May fell 9.1% compared to the previous year.
First home buyer mortgages, boosted by the federal government's expanded 5% Deposit Scheme in October, saw their first drop of -0.4% in March after the Reserve Bank of Australia's cash rate increase in February.
Following subsequent cash rate hikes in March and May, first home buyer loans recorded an annualised -2.7% drop in April before plunging -9.1% last month.
Equifax executive general manager Moses Samaha said Queensland recorded the biggest drop off in first home buyer loans (-16.2% year on year) followed by Victoria (-15.3% year on year).
"Earlier in the year, we saw that First Home Buyer demand was resilient and even growing, thanks in part to the momentum from the government's 5% FHB deposit scheme," he said.
"But now after successive rate hikes, those initial government boosts have been washed out by the realities of a high-rate market."
Home loan demand crashes
Equifax data shows the decline in new home lending has impacted every state and territory with none recording year-on-year growth in May.
"Last month I observed that we were beginning to see a 'slight handbrake' on mortgage demand and this month, after three successive rate hikes, the impact has well and truly hit with an observed significant decline," Mr Samaha said.
"There is no doubt there is market uncertainty at the moment - rate hikes, inflation, geopolitical pressures - Australians are likely feeling this and waiting to see how this will impact their financial position at large before taking on new commitments."
Here's a look at Equifax's year-on-year numbers for 2026 so far:
Source: Equifax
The May data may also reflect an early drop-off in investor lending on the back of changes to negative gearing and capital gains tax announced in the federal budget on 12 May.
Last week, Westpac said the housing tax reforms had triggered a 20% fall in the bank's investor loan applications in just the first three weeks after the announcement.
Refinancers also stranded
Refinancing activity was also down in May (-5.6% year on year) after recording significant jumps to start the year (+16.2% in January and +15.6% in February).
"You would expect higher interest rates to drive people to hunt for a better deal but the opposite is happening," Mr Samaha said.
"This drop could indicate consumer confidence is hitting a wall plus, with rates where they are, many people might actually be stuck.
"They want to refinance but cost-of-living pressures and new loan serviceability criteria might be impacting their ability to refinance."
The only growth in refinance mortgages across the board was in borrowers aged 65 and over refinancing to different lenders.
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| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
