- Westpac's home loan applications fell 20% since the federal budget
- The bank expects housing credit growth to drop further in the 2027 financial year
- Westpac forecasts this will be led by investor growth more than halving and continuing to fall in the 2028 financial year
Westpac revealed monthly mortgage applications for the third quarter had already dropped 11% before the May federal budget was handed down.
That saw the bank's application volumes fall to 20%, with the housing market already dealing with the effects of three consecutive interest rate increases when the government's property tax changes were announced.
Westpac's housing credit growth is forecast to fall further in the 2027 financial year, dropping to 4.7% from the 2026 figure of 6.8% growth.
Westpac expects this to be weighed down by investor segment growth more than halving from 9.1% in 2026 to 4.5% in 2027.
See also: Mortgage demand plunges, first homebuyers hardest hit
Uptick expected in FY 2028
In announcing a $1.8 billion net profit (excluding notable items) for the June quarter, Westpac acknowledged many households are feeling the impact of cost-of-living pressures but said its customers had continued to show resilience.
The bank forecast an uptick in housing credit growth in the 2028 financial year, led by owner occupier home loans climbing to 5.6% growth from expected growth of 4.8% in 2027.
"The undersupply of housing combined with population growth is expected to partially offset the impact of higher interest rates and recent Federal Government policy changes on the housing market," Westpac said.
However, the growth in housing credit doesn't extend to the investor market, forecast to fall further in the 2028 financial year to 4.4% from 4.5% in 2027.
Westpac not alone
Falling home loan volumes in Westpac's third-quarter update come after NAB last month flagged that demand for new loans had dropped by 15% in the June quarter compared to the previous quarter.
The combined value of those applications was down 9% over the same period, NAB said.
Two other big banks are expected to reveal how their lending has been affected by the housing market downturn when they release financial reports later this week.
Australia's biggest home lender CommBank is due to release its full-year results on Wednesday while ANZ hands down its third-quarter results on Thursday.
Fixed rate loans up, offsets down
In other home lending data, Westpac reported its mortgage delinquencies remained relatively steady for the June quarter at 1.14% for 30+ day delinquencies and 0.58% for 90+ days.
The results also showed a slight uptick in the number of fixed-rate loans on Westpac's mortgage book, accounting for 7% of new loans settled in the June quarter compared to 4% of home loans in the March quarter.
The balances held in home loan offset accounts were also down after a period of sustained growth, dropping to a combined $76 billion for the quarter from $77 billion in the previous quarter.
This suggests some offset balances are likely being eroded by higher home loan repayments on the back of consecutive interest rate increases, or are being accessed to meet other expenses.
Despite this, 46% of Westpac home loan borrowers remain more than six months ahead on their repayments.
Advertisement
Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.
| 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. | 5.95% 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 |
