Investor home loan applications plunge as banks compete harder for first home buyers

Australia's big four banks have reported steep falls in investor mortgage applications since the May 2026 Budget scrapped negative gearing and the capital gains tax discount on established residential properties. Commonwealth Bank, Westpac, ANZ and NAB have each disclosed double-digit percentage drops in investor loan applications over recent months, and banking analysts say the pullback is pushing lenders into sharper competition for owner-occupier and first home buyer business, a shift some are calling a coming "mortgage war".

What the banks are reporting

Home loan applications have fallen at all four major banks since the Budget changes took effect. Commonwealth Bank and NAB have each reported roughly a 15% drop in applications, Westpac has reported a fall of around 20%, and ANZ has reported a decline of around 12%. Westpac's consumer banking division noted a rapid drop in new investor loan activity within weeks of the announcement, with a further pull-back in investor activity expected in the near term.

The trigger is a change to how negative gearing applies. Under the new rules, an established property purchased after Budget night (7:30pm, 12 May 2026) can no longer have its losses offset against wages and salary, while newly built homes keep both negative gearing and the existing capital gains treatment. That carve-out means investors chasing a tax advantage now have a strong incentive to buy new rather than established stock, and it appears to be reshaping where investor money is heading.

Investors are shifting toward new-build stock

The market reaction has been visible on the ASX as well as in bank lending data. Shares in listed developers with large new-build pipelines, including Stockland and Mirvac, have jumped sharply on the expectation that investor capital will increasingly flow toward newly constructed homes that retain the tax concessions. At the same time, overall new residential loan commitments nationally slipped in the June quarter, reflecting the broader cooling in investor appetite for established properties.

• Established homes: investors purchasing after Budget night lose the ability to offset losses against other income, reducing the appeal of this segment for many investors.
• New builds: investors retain negative gearing and the existing capital gains discount, keeping the tax case for buying new largely intact.
• Properties bought before Budget night: existing investor holdings are grandfathered under the previous rules.

What this means for first home buyers

A meaningful pullback in investor demand for established homes typically means less competition at auctions and open homes in that segment, which is where most first home buyers are shopping. It may also be contributing to banks turning their attention toward owner-occupier borrowers, including first home buyers, as they look to offset softer investor volumes elsewhere in their loan books.

• Less investor competition on established homes: if you are targeting an existing house or unit rather than a new build, reduced investor demand in that segment could work in your favour when negotiating.
• Sharper lender pricing: as banks compete harder for a smaller pool of new borrowers, it is worth comparing rates across lenders rather than assuming your current bank offers the most competitive deal.
• New-build interest may rise: if investor demand increasingly concentrates on new-build stock, first home buyers considering off-the-plan or newly built homes may see more competition in that segment specifically.
• Market conditions can shift quickly: lending and investor sentiment can change from month to month, so treat this as a snapshot of current conditions rather than a guarantee of how the market will behave by the time you are ready to buy.

Run the numbers

Use these tools to see how the current lending environment applies to your own situation:

• Borrowing Power Calculator - see how much you may be able to borrow as an owner-occupier buyer under current lending conditions
• Scheme Comparison Tool - compare the government schemes available to you when deciding between an established home and a new build
• Interest Rate Shock Tester - check how your repayments would hold up if rates move before you settle