Westpac sees 20% slide in mortgage applications as tax changes bite

Westpac Banking Corp has reported a sharp 20% decline in mortgage applications, pointing to the impact of recent federal tax changes and higher interest rates on Australia's property market. The country's second-largest lender also projected that investor housing credit growth would halve over the next two years.

The bank now expects total housing credit growth to ease to 4.7% in 2027 from 6.8% in 2026, before recovering slightly to 5.2% in 2028 on the back of improved owner-occupied demand. Investor credit growth, however, is forecast to fall from 9.1% this year to 4.5% in 2027 and 4.4% in 2028.

The slowdown follows the government's decision to scrap generous tax concessions for property investors, a move that has weighed on demand across the sector. With the country's top four banks controlling over 70% of the national mortgage market, home loans remain a critical profit driver.

The 20% drop in mortgage applications is double the decline Westpac recorded in the weeks immediately after the tax changes were announced. Rival National Australia Bank last month reported a 15% fall in mortgage applications over the preceding three months.

Westpac CEO Anthony Miller said the housing market was facing headwinds from rates and policy, but noted that "the undersupply of housing combined with population growth is expected to partially offset" those pressures. The bank also said households continued to feel the strain of higher living costs, though business investment and customer resilience were supporting overall activity.

For the quarter ended June 30, Westpac posted cash earnings of A$1.8 billion, down from A$1.9 billion a year earlier. Its core net interest margin remained broadly stable, while lending and deposit books grew 2%. The bank's common equity tier 1 capital ratio stood at 12.1%, comfortably above regulatory requirements.