New Loan Market Group data shows investor loan applications sliding sharply as negative gearing reforms and three RBA rate hikes reshape borrower demand
Investor mortgage applications have fallen sharply across Australia since the federal Budget overhauled negative gearing and capital gains tax settings, with the latest broker network data confirming the housing finance market is undergoing its steepest pullback in years.
According to Loan Market Group's July 2026 market report, total home loan lodgements by number are down 26% nationally since early February, coinciding with three Reserve Bank of Australia (RBA) cash rate hikes and the government's May budget changes.
Investor lodgements have borne the brunt of the slowdown, falling 35% by value and 31% by number over the same period – the sharpest decline of any borrower category tracked in the report.
"The last six months have been challenging for many buyers," Loan Market executive chairman and chief executive Sam White told MPA. "First-home buyers have been greatly impacted by the increased cash rate, which has hit their borrowing power. The high cost of living combined with high average house prices – now sitting over a million dollars – has also made repayments unmanageable.
"We have seen a retraction in investors since the federal budget with many likely taking some time to reevaluate their strategies. The slow down in price growth has also led to some hesitancy with buyers not wanting to catch a falling knife.
"Looking forward, there are a number of factors that will impact whether buyers come back to the market. Cash rate changes greatly impact confidence – increases will likely see a further decline in buyer numbers and decreases typically see a return to the market.
"The silver lining is reduced competition has led to opportunities for those in a position to purchase, including upgraders and savvy first-home buyers."
Investors hit hardest
The May budget wound back negative gearing – the arrangement that allows property investors to offset rental losses against other taxable income – for established residential properties purchased after Budget night, while also removing the capital gains tax discount on newly acquired investment assets.
Loan Market's data shows the policy shift, combined with the RBA's tightening cycle, has driven a clear divide in investor behaviour: lodgements for new-build investment properties, which remain eligible for negative gearing, are down a comparatively modest 15% since February, while lodgements for existing properties – now excluded from the concession – have collapsed 40%.
First home buyers have not been spared, with lodgements down 23% by number and 19% by value since early February.
Owner-occupier upgraders have proven more resilient, recording a comparatively smaller 14% fall by number, suggesting existing homeowners are more insulated from the twin pressures of tighter borrowing capacity and shifting investment tax settings than either first-time buyers or investors.
The pullback is not evenly spread geographically. Victoria recorded the smallest decline, down 19% by number, which Loan Market Group attributes partly to a softer starting base heading into 2026. New South Wales and Queensland lodgements are down 25% and 27% respectively, while regional markets across South Australia, Western Australia, Tasmania, the ACT and the Northern Territory have been hit hardest, falling 32% by number.
The trend follows a similar pattern reported elsewhere in the broker channel. ASX-listed aggregator AFG recorded a sequential dip in June quarter lodgement volumes, a slowdown its chief executive linked directly to the combined impact of rate hikes and the tax overhaul
That softening came off the back of a March quarter in which investor lending had reached its highest share of new housing finance in nearly a decade, underlining how abruptly sentiment has turned.
What's next
The next three months will be critical in determining how deep the downturn runs. Auction clearance rates appear to have troughed in the high-40s, while spring listings – typically a seasonal catalyst for renewed activity – are expected to pick up around September.
All eyes will also turn to the RBA's next cash rate decision on 11 August, following a cycle in which economists have flagged the possibility of further tightening before year's end. A fourth hike would add to borrowing costs already squeezing both investors and first home buyers, and could extend the lodgement slowdown documented in Loan Market Group's figures.
