Fewer Australians are applying for mortgages than at any point in almost four years, and the ones who still are applying are borrowing more than ever. That tension is the story in the latest Equifax tracker, and it says a lot about who the current market actually works for.
Overall mortgage demand fell 19.2% in September, taking it to the lowest level since October 2022. August looked mild by comparison, with a 14.1% fall, so the slide has picked up speed rather than levelled off.
A thinner market with bigger loans
The age breakdown shows where the pullback is concentrated. Borrowers aged 18 to 25 sought 25% fewer loans, and the 26 to 35 group sought 22.5% fewer. These are the households that normally fill the bottom of the market.
First-home buyer applications fell 22.1%, the sharpest annual drop since December 2022. Yet the average loan for this group sits at a record $743,000.
Put those two facts together and the picture is clear. The first-home buyers still getting through are those with enough income, deposit or family support to clear the test at a very high loan size. Everyone else is waiting, renting or giving up for now.
Key numbers
- Overall mortgage demand: down 19.2% in September, lowest since October 2022
- First-home buyer applications: down 22.1% on a year earlier
- Average first-home buyer loan: a record $743,000
- Multi-mortgage investor applications: down 18%, after an 11.4% dip in August
How serviceability buffers turn into a trap
Lenders must assess whether you can still afford repayments if rates rise by a set buffer above the actual rate. That is sensible when you are buying. It becomes a barrier when you want to move an existing loan.
A borrower who took a loan at a lower rate may pass today’s test only barely, or not at all, even though they have been paying the loan without trouble. Refinancing is meant to be the escape valve, but the data suggests the valve is stuck.
Lender switching fell 8.8% and same-lender refinancing fell 28%. An industry executive pointed to tough serviceability checks as the reason borrowers cannot move. Central bank minutes put scheduled repayments near 10% of household disposable income, which helps explain why there is so little room left in the test.
The catch is that a borrower who cannot refinance also cannot shop for a better rate. That weakens the pressure on lenders to compete for existing customers. Our guide to home loans, lenders and refinancing covers the mechanics.
Who is still moving, and who is stuck
The refinancing numbers are not uniform. Switching rose among over-55s but fell 14.2% for 26 to 35-year-olds.
That split fits the serviceability story. Older borrowers tend to have more equity, more income history and smaller loans relative to their assets, so they clear the test more easily. Younger borrowers carrying large, recent loans are the ones locked in.
Investors are pulling back too. Multi-mortgage investors lodged 18% fewer applications, a deeper fall than August’s 11.4%.
One small outlier is credit cards. Demand rose 10%, linked to the 1 October interchange fee changes. That is a regulatory effect, not a sign of confidence.
What the pullback means for prices
Weaker demand does not automatically mean collapsing prices. National prices have fallen six months in a row, yet they sit only 3.3% below the March 2026 high.
That is a mild correction so far. A market with record loan sizes and fewer buyers is a market where each remaining buyer is stretched, and stretched buyers are sensitive to rate moves.
Base case: prices drift lower slowly while demand stays weak. Downside: if rates rise again, the borrowers at the edge of the test drop out and the fall deepens. Upside: demand stabilises and the six-month slide stops without gaining pace. The data supports the first two more than the third for now. For the wider stress picture, see our piece on mortgage stress at a 40-year high.
Where to look for relief
If you are an existing borrower, check your current rate against what lenders offer new customers. If the gap is wide and you cannot pass a refinance test, ask your own lender for a rate review. They are more willing to negotiate than to lose the loan altogether.
If you are a first-home buyer, work out your borrowing capacity under a buffer assessment before you fall in love with a property. Treat the record $743,000 average as a warning about how far stretched buyers are going, not a target.
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General info, not financial advice.
