Mortgage demand plunges as first home buyers, young Aussies retreat
- Home loan demand fell 19.2% in September
- First home buyer demand dropped 22.1%
- Borrowers aged 18-35 recorded the sharpest pullback in mortgage applications
- Investor demand and refinancing activity also weakened as high rates continued to weigh on borrowing
The latest Equifax data found overall mortgage demand plunged 19.2% in September, marking the steepest decline since October 2022.
The decline has effectively erased the modest rebound in August.
"While August provided a brief moment of pause where mortgage demand appeared to find a temporary floor at -14.1% YoY, September data indicates that the underlying market contraction has resumed with greater intensity," Kevin James, chief solution officer at Equifax, said.
The Equifax report suggests higher borrowing costs and ongoing cost-of-living pressures continue to dampen home loan demand.
"Rather than taking on expanded debt commitments in a sustained high-rate environment, Australian households are taking a decisive step back," Mr James said.
See also: Which lenders are increasing variable home loan rates
First home buyers hit hardest
First home buyer demand fell 22.1% year-on-year in September, worsening from declines of 20.1% in August and 19.2% in July.
Equifax said it was the largest annual drop in first home buyer demand since December 2022.
"When comparing this to the strong surge observed during the final quarter of last year, the gap in market entry is widening significantly," Mr James noted.
Queensland (down 24.7%), the ACT (down 23.4%) and NSW (down 22.8%) recorded the largest pullbacks.
Affordability constraints continue to weigh on first home buyers, with the average first home buyer mortgage sitting at $743,000 nationally.
Younger Australians lead mortgage retreat
Equifax's data showed younger Australians are driving much of the decline in mortgage demand.
Demand among 18-25 year olds fell 25% over the year, while applications from 26-35 year olds dropped 22.5%.
"Even though we've seen some property value dips recently, baseline prices still remain high," Mr James noted.
Despite the further 0.9% decline in national home values, the median Australian dwelling price remains above $900k.
According to Mr James, a combination of elevated home prices, strict serviceability requirements, high interest rates and cost-of-living pressures is making it harder for aspiring buyers to enter the market.
"For many prospective entrants, bridging the deposit and repayment threshold is likely becoming increasingly difficult without institutional or familial support," he added.
Investors and refinancers pull back too
Investor demand also weakened, with mortgage demand among borrowers holding two or more mortgages falling 18% year-on-year in September, compared with declines of 11.4% in August and 15.1% in July.
External refinancing, where borrowers switch to another lender, fell 8.8% annually, while internal refinancing with the same lender plunged 28%.
Internal refinancing recorded the weakest performance of all mortgage segments tracked by Equifax.
"Many existing mortgage holders wanting to shop around for a better rate are likely finding themselves unable to clear the serviceability needed, effectively locking them into their current arrangements," Mr James said.
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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 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.19% p.a. | 6.23% p.a. | $3,059 | 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 | ||||||||||
6.39% p.a. | 6.42% p.a. | $3,124 | Principal & Interest | Variable | $0 | $300 | 60% | |||||||||||||
6.23% p.a. | 6.23% p.a. | $3,072 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
