Mortgage demand has reversed sharply in the wake of recent cash rate increases and changes to negative gearing and capital gains tax discounts, according to new Equifax Australia analysis of Q2 2026 credit trends.
The data shows mortgage applications swung from 3.7% year-on-year growth in the pre-reform period of March and April to a 12.5% contraction in May and June, once the rate rises and tax changes took hold. First-home buyer enquiries were among the hardest hit, dropping 15% year-on-year in the post-reform window, while credit card, personal loan, and auto loan demand also softened.
Despite the broader pull-back, pockets of opportunity have emerged for buyers.
Perth and Adelaide currently offer the lowest mortgage value entry points, led by Kwinana and Gawler, while regional and non-capital areas have proved far more insulated than the major metros. Perth was also the only major capital to hold positive momentum through the period.
That resilience stands in contrast to the eastern seaboard, where loan sizes have shrunk fastest. The national average mortgage enquiry amount contracted by $8,000, or 1.1%, between March and June, with Brisbane, Sydney and Melbourne all recording double-digit falls well above the national trend. At a suburb level, Sydney's Canada Bay saw the steepest drop nationally, while Melbourne's Keilor and Queensland's Maroochy also posted significant declines.
Equifax Australia chief solutions officer Kevin James (pictured) said the shift marked a clear change in pace for borrowers.
"The simultaneous arrival of the May rate hike and tax reforms have coincided with a decline in consumer borrowing demand during the second quarter of the year, which is in contrast to the growth and momentum we observed earlier in the year," James said.
The RBA lifted the cash rate by 25 basis points to 4.35% at its May meeting, the third increase this year. Changes to negative gearing and the CGT discount, announced in the May federal budget, have since passed into law, limiting negative gearing to newly-built properties from 1 July 2027, with properties bought before 12 May 2026 grandfathered under existing rules.
Alongside softer demand, financial hardship accounts increased over the quarter, with mortgage hardship up 5.3% and non-mortgage hardship up 5.6%. Personal loans recorded the highest hardship rate at 1.10, while credit cards remained the most resilient credit product at just 0.14%. Victoria emerged as the country's hardship hotspot.
Despite the rise, Equifax framed the trend as a sign of borrowers acting early rather than falling behind.
"The 5.6% rise in non-mortgage hardship accounts likely signals responsible, proactive management," the report noted, pointing to broadly stable late-stage arrears across key credit types.
James said conditions were likely to keep evolving.
"We'll continue closely observing these evolving credit dynamics," he said, noting that historical data suggests market participants tend to adjust quickly as new baseline conditions settle.
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