Economic pressures are pushing buyers to the sidelines, weakening competition as mortgage demand falls, first home buyers retreat, and refinancing activity slows.
Equifax’s Consumer Market Pulse found mortgage demand fell for the sixth consecutive month in September, down 19.2 per cent year on year.
With overall mortgage demand having fallen to a level not seen since October 2022, Equifax chief solution officer Kevin James said the September results revealed a notable shift in how Australians chose to borrow.
“Rather than taking on expanded debt commitments in a sustained high-rate environment, Australian households are taking a decisive step back,” James said.
“While August provided a brief moment of pause where mortgage demand appeared to find a temporary floor, September data indicates that the underlying market contraction has resumed with greater intensity.”
The data showed NSW saw the largest drop, 21.2 per cent, while the ACT was the next most heavily impacted state, with its 21 per cent drop outpacing the national average.
Queensland, Victoria, South Australia, and Western Australia all saw more moderate declines in mortgage demand, performing as well as or better than the national average.
Additionally, despite a minor rebound up to 11.4 per cent in August, demand from potential investors fell to 18 per cent below the 12-month mark.
He said the shift in borrower sentiment wasn't limited to new loans, with refinancing also hit hard.
Data showed that the volume of mortgage holders refinancing with different lenders fell 8.8 per cent YoY, while refinancing with the same lender plummeted 28 per cent.
“In the current economic climate, strict regulatory serviceability assessments appear to be holding borrowers in place.”
“Many existing mortgage holders wanting to shop around for a better rate are likely finding themselves unable to clear the serviceability needed, effectively locking them into their current arrangements."
Economic headwinds provide obstacle for first home buyers
According to the data, younger cohorts continued to lead the mortgage retreat, with demand from 18–25-year-olds 25 per cent below the market set 12 months ago.
The 26–35 category fell similarly, with demand down 22.5 per cent.
Similarly, mortgage demand from first home buyers has fallen significantly over the past 12 months, dropping by 22.1 per cent, the largest YoY drop since December 2022.
James said that compared with the surge in first home buyer activity 12 months ago, the gap in market entry had widened significantly.
He said buyers faced compounding pressure to enter the market, driven by strict serviceability testing, high interest rates, and the cost of living, particularly for those in the 18–35 demographic.
“Even though we’ve seen some property value dips recently, baseline prices still remain high – with average first home buyer mortgage sizes hovering at record levels of $743,000,” he said.
“For many prospective entrants, bridging the deposit and repayment threshold is likely becoming increasingly difficult without institutional or familial support.”
Additionally, James said that despite declining mortgage activity, appetite for borrowing remained, with credit cards and personal loans up YoY.
He said older Australians drove most of the acceleration, with applications from those aged 56+ up 36 per cent.
"In unsecured credit, credit card demand surged to +10 per cent YoY in September, building on the positive growth observed in August (+2.9 per cent).”
“As financial institutions communicated upcoming changes to rewards earn rates, points caps, and fee structures throughout August and September, value-conscious spenders actively churned their card portfolios to secure established rewards terms or switch products ahead of the regulatory deadline.”
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