Home loans slow as staggering six-figure loss looms for one Aussie city
Australia’s mortgage market has slowed to a crawl as the nation’s housing downturn accelerates, with forecasts revealing Sydney home owners could face a staggering drop of more than $200,000 in median property values.
According to the latest Australian Prudential Regulation Authority (APRA) data for July, home loan growth across Australian banks clocked in at a tiny 0.2 per cent for the month.
National house prices are continuing to fall, new data suggests. Dion Georgopoulos / Australian Financial Review
Data insights director at Canstar.com.au, Sally Tindall, warned that the mortgage market is rapidly losing momentum.
“The mortgage market’s latest results have come in, and it’s clear the heat is coming out of the sector,” Tindall said.
“You have to trace the data back to July 2023, towards the end of one of the RBA’s steepest rate hiking cycles, to find a month this quiet.”
The sluggish performance comes as lenders feel the pressure of reduced buyer demand and declining property values.
“The double-whammy of three RBA rate hikes in 2026, alongside the federal government’s property tax overhaul, has left the banks largely treading water, with NAB’s mortgage book going backwards for the first time since July 2024,” Tindall said.
“This is, in part, because fewer people are applying for new mortgages, but also, that property prices are on the slide, with Cotality data out today showing 93 per cent of capital city suburbs saw home value drops over winter.”
Six-figure drops projected across capital cities
New forecasting released by Commonwealth Bank (CBA) yesterday suggests the real estate correction is deepening and broadening nationwide.
In an economic insights report, CBA economists downgraded their outlook, revealing that national dwelling prices had dropped 0.9 per cent in August - marking five consecutive months of decline and leaving prices 3.6 per cent below their March peak.
“The adjustment over the past three months has been larger and faster than we anticipated,” CommBank Senior Economist Trent Saunders said.
“The downturn has also broadened materially.”
Growth in home loans have slowed to a trickle for the major banks. Photo: BeyondImages
CBA now expects national dwelling prices to drop around 9 per cent peak-to-trough this cycle, with major capital cities facing severe value reductions.
Sydney is set to bear the heaviest hit, with CBA predicting a peak-to-trough drop of 13 per cent.
After hitting a peak median price of $1,629,736 in January 2026, Sydney prices are forecast to slide down to a trough of $1,417,870 - wiping out an estimated $211,866 in value.
Tindall said the CBA forecast for Sydney marked a major downward shift.
“That’s no longer spare change, but a material drop even after three rate hikes and a potential fourth waiting in the wings,” Tindall said.
The capital city decline is not isolated to Sydney. Melbourne median house prices are forecast to fall by 12 per cent, dropping from a November 2025 peak of $996,693 down to $877,090 - a loss of $119,603.
House prices in Brisbane, Perth and Adelaide are all predicted to drop by 8 per cent.
Interest rate hikes and bank rate shifts
The shifting economic landscape has prompted three of Australia's big four banks to alter their official cash rate projections, with most now pencilling in another rate hike before the year ends.
CBA and ANZ have both predicted a 0.25 percentage point rate hike in November 2026, which would take CBA's forecast cash rate to 4.60 per cent.
NAB is forecasting a 0.25 percentage point hike as early as September 2026, suggesting a second increase may be needed in November.
Westpac stands alone among the major banks, holding off on near-term hikes and forecasting its next move will be a 0.25 percentage point cut in August 2027.
The prospect of further central bank tightening is already hitting retail mortgage pricing.
Canstar noted that out-of-cycle variable rate discounts for new customers are tapering off.
“While the home lending market has been focused on new customer variable rate cuts over the last three months, last week was noticeably different, with just two lenders cutting new customer variable rates. Meanwhile, three lenders hiked,” Tindall said.
“Certainly, three of the big four banks’ economic teams now believe the RBA’s next move will be a hike.”
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