Australia's mortgage market has shifted decisively. After recording double-digit growth in January, overall mortgage demand fell 6.6% year-on-year in May 2026, according to new Equifax data — the most significant monthly decline of the year so far. First-home buyer demand dropped even harder, down 9.1% on the prior year, while refinancing activity — previously a bright spot — also turned negative, falling 5.6% over the same period.
Equifax executive general manager Moses Samaha (pictured) said the turning point was unmistakable.
"Last month I observed that we were beginning to see a 'slight handbrake' on mortgage demand, and this month after three successive rate hikes, the impact has well and truly hit with an observed significant decline," Samaha said.
The reversal has been swift. As recently as January, overall mortgage demand was running at +10.7% year-on-year. By April it had barely turned negative at -0.9%. May's -6.6% represents a deterioration of 17 percentage points in year-on-year terms in just five months.
ABS Lending Indicators for the March quarter 2026 confirm the same trend — total new loan commitments fell 6.2%, with owner-occupier volumes down 6.9% and first-home buyer commitments down 4.3%.
The decline is national in scope. Every state and territory recorded negative year-on-year mortgage demand in May — a first for 2026. First-home buyer demand fell hardest in Queensland (-16.2%) and Victoria (-15.3%), while New South Wales (-12.3%) and South Australia (-11.9%) also recorded double-digit falls. Western Australia was the most resilient at -8.4% but still recorded a decline.
Samaha noted the breadth of the deterioration was significant.
"Earlier in the year, we saw that first-home buyer demand was resilient and even growing, thanks in part to the momentum from the government's 5% FHB deposit scheme. But now, after successive rate hikes, those initial government boosts have been washed out by the realities of a high-rate market," he said.
The age data tells an equally stark story. Millennials aged 26 to 35 experienced the steepest drop in first-home buyer demand at -16.3% year-on-year. The only cohort to record any positive movement was the 65-plus age group, which saw a modest +3.3% uptick in refinancing with a different lender — suggesting older borrowers are more insulated from serviceability constraints and still willing to shop around, even as younger cohorts retreat.
Perhaps the most telling signal for brokers is the collapse in refinancing activity. Despite three rate hikes creating an apparent incentive to shop around, refinancing with a different lender fell 4.2% year-on-year in May, while same-lender refinancing dropped 7%.
Samaha pointed to a structural trap forming in the market.
"On the refinancing front, you would expect higher interest rates to drive people to hunt for a better deal, but the opposite is happening,” he said. “This drop could indicate consumer confidence is hitting a wall. Plus, with rates where they are, many people might actually be stuck. They want to refinance, but cost-of-living pressures and new loan serviceability criteria might be impacting their ability to refinance."
Broader consumer data supports his reading. The Westpac–Melbourne Institute Consumer Sentiment Index fell to 80.6 in June — among the weakest in its 50-year history — with house price expectations dropping 14.9%, the share of consumers expecting price rises falling from 66% to 52% in a single month.
For brokers, the data signals two distinct client conversations: those under serviceability pressure who cannot act, and those waiting on the sidelines for confidence to return. In Queensland and Victoria — where first-home buyer demand has fallen hardest — retention and refinance conversations with existing clients may be the more productive near-term focus.
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