​​​​​​​Mortgage demand falls sharply after rate hikes and tax reforms

Mortgage demand in Australia contracted sharply in the second quarter of 2026, according to new data from Equifax, as back-to-back cash rate increases and changes to negative gearing and capital gains tax (CGT) discount rules reshaped borrower behaviour.

The Equifax Q2 2026 Consumer Credit Analysis found that mortgage enquiry growth swung from +3.7% year-on-year (YoY) in the pre-reform period (March–April) to -12.5% YoY in the post-reform period (May–June) — a shift of 16.2 percentage points.

First home buyer enquiries declined 15% YoY in the post-reform period.

"The simultaneous arrival of the May rate hike and tax reforms have coincided with a decline in consumer borrowing demand during the second quarter of the year, which is in contrast to the growth and momentum we observed earlier in the year," said Kevin James (pictured right), chief solutions officer at Equifax Australia.

The cooling effect extended beyond mortgages. Credit card demand fell further to -4.8% from -2%, personal loan demand declined from +5.5% pre-reform to -0.4% post-reform, and auto loan demand deepened its contraction to -6.6%.

Enquiry values contract across major capitals

The national average mortgage enquiry amount fell by $8,000 (-1.1%) between March and June 2026. Brisbane recorded the steepest capital-level decline (-$15,000), followed by Sydney (-$12,000) and Melbourne (-$11,000). Hobart saw the largest proportional drop at -3.2% (-$19,000). Perth was the only major capital to record a positive movement, rising $1,000 (+0.2%).

At a suburb level, Sydney's Canada Bay recorded the largest single decline nationwide, with average mortgage enquiry amounts falling $145,262. Melbourne's Keilor (-$101,301), Queensland's Maroochy (-$119,016), and Surfers Paradise (-$101,168) also saw six-figure contractions.

Regional and non-capital areas proved comparatively resilient, recording an average decline of $4,000 (-0.5%).

"While shrinking mortgage enquiry amounts likely reflect a broader market cooling, they also reveal emerging windows of opportunity for prospective buyers," James said.

Perth and Adelaide recorded the lowest mortgage enquiry values among major markets, with Perth's Kwinana ($526,000) and Adelaide's Gawler–Two Wells ($565,000) leading affordability nationally. A small number of suburbs bucked the national trend, including Adelaide's Playford (+$15,000) and Kwinana (+$8,000).

Hardship accounts rise across credit types

Financial hardship accounts increased across the quarter. Mortgage hardship rose 5.3% quarter-on-quarter (QoQ), while non-mortgage hardship accounts grew 5.6% QoQ. Personal loans recorded the highest overall hardship rate at 1.10%, followed by auto loans at 0.82%. Credit cards remained the most resilient product, with a hardship rate of 0.14%.

Victoria led the country in both mortgage and total hardship rates, with a mortgage hardship rate of 0.78%.

Equifax interpreted the rise in non-mortgage hardship as a sign of proactive borrower behaviour, noting that late-stage arrears remained broadly stable or improved slightly across key credit types during the quarter.

"We'll continue closely observing these evolving credit dynamics," James said. "While current market factors have undeniably reshaped borrowing behaviour in the near term, historical data shows that market participants tend to adjust quickly as new baseline conditions settle."

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