Investor lending plunges as new home loans record their biggest quarterly fall

Australia’s home lending market contracted sharply in the September quarter, with the number of new dwelling loans recording its largest quarterly fall in the available Australian Bureau of Statistics series.

The ABS said 111,878 new dwelling loan commitments were accepted during the quarter, excluding refinancing. That was 15 per cent fewer than in the June quarter and 21.4 per cent below the level recorded a year earlier.

The value of new loans fell 15.5 per cent over the quarter to $81.2 billion.

The retreat was led by property investors. The number of new investor loans dropped 30.6 per cent in three months to 35,301, while their combined value fell 32.3 per cent to $24.7 billion. Compared with the September quarter of 2025, investor loan numbers were down 38.5 per cent.

Owner-occupiers proved more resilient, but their activity also weakened. The number and value of new owner-occupier commitments each fell 5.3 per cent over the quarter.

First home buyers were not immune

The figures do not show first home buyers simply replacing departing investors.

Owner-occupier first home buyer loan numbers fell 8.6 per cent to 26,415, while the value of those loans declined 8 per cent to $16.2 billion. Non-first home buyer commitments fell by a smaller 3.7 per cent.

That distinction matters for buyers interpreting the downturn. Reduced investor competition may improve negotiating conditions in some markets, particularly for established apartments and lower-priced homes. However, falling competition does not automatically restore purchasing power when lenders are assessing applications against higher repayments and serviceability buffers.

The average new owner-occupier loan remained large despite the decline in transaction volumes. On the ABS original figures, the national average was about $736,000 in the September quarter. It was approximately $847,000 in NSW, $754,000 in Queensland and $721,000 in Western Australia.

Buyers therefore face two different forces: softer property prices and fewer competing bidders on one side, but more restrictive finance on the other.

Higher rates are reaching existing borrowers

A separate Commonwealth Bank trading update released on Wednesday provided another sign of mortgage pressure. Australia’s largest home lender said home loans at least 90 days in arrears increased by seven basis points during the September quarter.

The bank attributed the increase to cost-of-living pressure, higher inflation and interest rates, while also noting that earlier pauses in some late-stage collection activity had slowed the resolution of overdue accounts.

Commonwealth Bank also said its collective provisions had increased partly because lower house prices reduced the protection available in its mortgage portfolio. This does not mean most borrowers are in difficulty, but it indicates lenders are allowing for a weaker housing and household-finance environment.

The ABS figures cover loans accepted during the three months to September, so they do not capture the full effect of the Reserve Bank’s November cash-rate increase. Some buyers who had pre-approval earlier in the year may now find that the maximum amount available has changed.

What the slowdown means for the market

A fall in loan commitments generally points to fewer transactions ahead, although the relationship is not exact. It can also lengthen selling campaigns and place greater pressure on vendors whose price expectations were formed in a stronger market.

For investors, the scale of the lending decline suggests that financing costs, changing tax settings and expectations of weaker prices are collectively changing purchasing decisions. Reduced investor activity could give owner-occupiers more choice, but a prolonged withdrawal may also limit the future supply of privately owned rental homes.

Sellers should pay close attention to finance clauses and settlement periods. A buyer’s offer is only as strong as their ability to secure final loan approval, particularly when rates and valuations are moving.

What it means for you

• Buyers should have borrowing capacity reassessed before bidding, even if they already hold a pre-approval.
• First home buyers may encounter less investor competition, but their own loan numbers show finance remains a major hurdle.
• Sellers should examine deposit size, finance conditions and settlement risk rather than focusing only on the highest offer.
• Investors need to test a property against current rates and cash flow without relying on rapid capital growth.