Higher interest rates and recent tax changes weighed on the Australian mortgage market in the June quarter, with lending and loan volumes falling by more than 5%. This also followed declines in the March quarter. So far this year the housing market has had to contend with three RBA rate hikes as well as the federal budget that included changes to the tax treatment of capital gains and negative gearing. According to Cotality, housing prices nationally fell by 1.9% over the three months to July - but that only pares back their rise over the past year to around 5%, leaving the median price at just below $930k.
Housing finance demand continued to slow in the June quarter after easing earlier in the year. Since reaching record highs at the end of 2025, lending commitments have gone on to fall by 8.3% across the first half of this year, incorporating a 5.2% fall in the June quarter. Nonetheless that still leaves the current value of lending ($97.6bn) up 6.8% on a year earlier, an increase that was supported by RBA rate cuts in 2025.
The brunt of the slowdown has been in the investor segment. The value of those loans was off by 10.2% in the latest quarter ($37.1bn) and fell by 13% through the first half. As it stands, the tax changes to negative gearing and capital gains discount have had a far larger impact on this segment than rate hikes. By comparison, owner-occupier lending was down 5.2% in the June quarter and 8.4% overall in the first half, with rate hikes and affordability pressures likely to be the more impactful headwinds.
All that said, the tax changes in the budget have been aimed at incentivising investors to add to supply by advantaging new builds, which will still be able to be negatively geared. Accordingly, construction-related lending (construction of new homes and purchase of newly completed homes) to investors was up by more than 6% in the June quarter. That compares to a near 13% fall in investor lending for existing homes.
Loan volumes have taken a hit as higher interest rates have slowed growth in loan books. In the June quarter, loan volumes fell by 5.4% as they unwound back to levels seen a year earlier (134.2k). Again, the slowdown was more prominent in the investor segment, down 8.6% to 52.6k, whereas owner-occupier loans declined 3.3% to 81.6k. Total demand fell by 9.4% in the first half of this year (investors -12.9% and owner-occupiers -6.9%) - a complete reversal of its 10.4% rise in the back half of last year when rate cuts were a key support.
