The country’s largest mortgage lender reported investor loan applications down 28% since the May budget tax changes, owner-occupier applications down 9%, and then told the market the decline had bottomed by late June. Applications are now holding steady and the bank expects landlord borrowing to pick up through 2027.
That is not the script most of the property industry spent the last three months rehearsing. The actual loan-book data from a bank writing one in four Australian mortgages suggests the structural shift many predicted, mass landlord exit, collapsing investment volumes, spiralling rents, will not materialise.
What the numbers show
Investor loans hit $45 billion in the six months to December 2025, then $37 billion in the first half of 2026. The pullback is real. Investor loan growth has fallen roughly 25% since the start of the year, according to central bank data, while owner-occupier loan growth is down about 10%.
Two drivers: the central bank lifted rates three times, and the government amended negative gearing and capital gains tax treatment in the May budget, making some investor structures less lucrative.
But the same bank now says applications have stabilised. It is still receiving close to three applications for every four it took before the budget. If a 25% fall in investor borrowing became the new norm across the system, around 14,000 new landlords would take out a loan each month, down from 19,000 at the start of 2026, but in line with 2023 and 2024 growth rates.
That is a return to recent-normal investor activity, not a market exodus.
Why the turn happened faster than expected
Interest rates were already weighing on applications going into May. The budget added to an existing slowdown, but it did not create one from scratch. The bank’s chief executive told analysts the worst had passed by late June, and competitor banks are reporting similar patterns: one rival lender saw owner-occupier applications fall 18% and investor applications fall 26%, but is still forecasting slow, steady growth in home lending supported by a rate cut next year.
The central bank governor made clear on Tuesday that rates are still more likely to rise than fall, and she will not be held captive by a slumping housing market. She also argued the slowdown is going beyond interest-rate fundamentals thanks to an outsized loss of confidence, and expects it to settle once confidence returns.
That confidence is already beginning to stabilise in the loan-application data, even with rates still elevated and tax changes fully priced in.
The catch
- Investor loans are still down 25% from the December peak, this is stabilisation at a lower level, not a rebound to record highs
- The central bank has not ruled out further rate rises, which would test whether this floor holds
- Rents are rising slower than inflation, which narrows yield and changes the investment case for some buyers
- Tax changes are now permanent settings, the structural shift is smaller than feared, but it is real
The supply argument still stands
The central bank governor laid out the core case for housing investment, unchanged since the budget: supply is still short relative to demand. That imbalance will resolve somehow in prices, and it will correct.
Thousands of Australians are still buying investment properties each month. Rents are not spiralling. The doomsday warnings about landlord flight have not matched the loan-book reality.
The investment market is adjusting to higher rates and tighter tax settings, not collapsing under them. The floor is in, the numbers are stabilising, and the structural shortage remains.
What happens if confidence stalls again
The current stabilisation assumes confidence continues to recover and rates do not rise sharply from here. If either assumption breaks, another rate hike, a sharp fall in buyer sentiment, a credit event offshore, investor applications could fall further.
But the base case, supported by the largest lender’s actual loan book, is that the worst of the investor pullback has already passed and demand will improve gradually through 2027.
For investors making decisions now: the market has adjusted to the new tax settings faster than most expected, loan volumes are holding at viable levels, and the supply shortage has not been solved. The opportunity has not disappeared, it has repriced.
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If you are weighing an investment purchase in the next six months, the practical question is not whether the market has bottomed, the major bank says it has, but whether your cashflow can handle rates staying higher for longer, and whether the yield stacks up without the tax benefits that no longer apply to new purchases. The capital gains tax valuation deadline is one near-term decision point; the RBA communication policy is another.
General info, not financial advice.
