Australian households are stepping back from new borrowing at a rate that is outpacing previous tightening cycles, according to Equifax's Consumer Market Pulse for May.
Mortgage demand fell 10.9% year-on-year in May — a broader measure that includes refinancing — while auto loans dropped 11.9% and credit card enquiries declined 6.8%.
Kevin James (pictured), chief solution officer at Equifax, attributes the pullback to something more than typical rate sensitivity.
"Consumer appetite for discretionary, big-ticket commitments has decelerated noticeably," James said. "Facing a cumulative 'double whammy' of persistent cost-of-living constraints and three successive interest rate hikes peaking in May, households appear to be responsibly choosing to preserve liquidity rather than stretch their borrowing capacities.”
The sharpest signal for mortgage brokers sits in the new lending figures. New mortgage demand — including first-home buyer enquiries — fell 13.4% year-on-year in May, with Victoria down 15.5% and Queensland down 16.2%. The 26–35 age cohort recorded the steepest decline at 16.3%, suggesting the first-home buyer segment energised by the expanded 5% deposit guarantee is now feeling the weight of higher rates most acutely.
Refinancing activity also softened, with switching enquiries down 8.3% year-on-year and same-lender upgrade refinances falling 11.3%. James said the shift was unmistakable: "The significant -13.4% decline in new mortgage lending enquiries reveals that the resilient activity we tracked over Christmas and early autumn has hit a wall."
The speed of the reversal tells the full story: overall mortgage demand was running at +10.7% year-on-year in January 2026 before falling to -6.6% in May — a 17-percentage-point deterioration in five months, with every state and territory in negative territory for the first time in 2026.
The pullback extends beyond owner-occupier demand. Westpac recorded a 20% fall in investor loan applications following the federal budget's negative gearing and CGT changes, with head of consumer banking Carolyn McCann calling it "a mood of concern rather than crisis" — a combination of the budget, three rate rises, and the Middle East conflict landing simultaneously on household budgets.
While younger cohorts drove the steepest declines, the picture was not uniform across all demographics. Personal loan demand was the notable exception, essentially flat at +0.37% year-on-year nationally, with the 56-plus cohort recording an 11.5% increase driven largely by Western Australia.
James observed that "more mature Australians are still tapping into credit" even as younger cohorts pulled back across mortgages, auto loans, and credit cards simultaneously — a demographic split that may reflect different levels of equity, income security, and exposure to variable rate debt across age groups.
The credit card decline is one of the most telling signals in the data. In previous tightening cycles, credit cards acted as a cash-flow buffer — households would draw on them when repayments tightened. The fact that credit card demand has now fallen alongside mortgages and auto loans suggests households are not just deferring big purchases; they are pulling back across the board.
"The key differentiator we are observing today is a deeper level of consumer exhaustion; unlike previous cycles where credit cards had acted as temporary cash-flow safety tools, we are now seeing an across-the-board pullback," James said.
History offers some reassurance.
"Based on these historical patterns, we know the Australian credit market is highly resilient and we would not expect demand levels to remain depressed for an extended duration," James said.
The clients pausing now are, on past form, likely to return — which means the near-term pipeline question for brokers is less about whether demand recovers and more about when.
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