Shock decline in mortgage numbers stirs up the banks

A BIG fall in home loan lending has sent shockwaves across the banking sector, with Australia's biggest mortgage provider taking most of the backlash as investors sold down its shares.

The number of national home loan commitments collapsed by 15 per cent in the September quarter and 21.4 per cent over the year, the Australian Bureau of Statistics reported on Wednesday.

The data captured the first full three months' impact of the Albanese federal government's budget changes to capital gains tax concessions and negative gearing advantages used by property investors.

"Investor tax changes in the May Budget are compounding the drag from repeated rate hikes, which have cut borrowing capacity," Oxford Economics Australia lead economist Maree Kilroy said.

"This is occurring alongside cost-of-living pressures and falling property prices hitting buyer confidence."

§ Commonwealth Bank home loan applications fall

The data came after Commonwealth Bank of Australia released an earnings report, showing new home loan application numbers fell by 16 per cent in the September quarter compared to a year ago.

At its annual results in August, boss Matt Comyn said applications had ticked up after hitting a nadir in the last week of June and the bank expected a total drop of four or five per cent in 2026/27.

"And we expect an improvement into the later stages of financial year 2027," he added.

Commonwealth Bank isn't the only one seeing the impact of higher rates on lending, VanEck senior portfolio manager Cameron McCormack said. 

"The consumer struggle is real and the banks are starting to feel the pinch," he said.

And there are signs that higher interest rates and cost of living pressures driven by the Middle East war will continue to affect the sector.

"We expect new home lending to keep contracting over the coming year, with investor loans to fall twice as fast as owner-occupiers," Kilroy said.

The bureau said most of the quarterly decline was driven by a 30.6 per cent drop-off in loans to investors, followed by a fall of 8.6 per cent in first home buyer numbers.

§ Commonwealth Bank shares fall after lending data

Commonwealth Bank is the nation's biggest home loan lender, with about a 25 per cent market share and around two million accounts.

Its shares were trading little changed at $168.96 before the bureau released its data at 11.30am (AEDT) but fell sharply as the market digested the implications.

The stock, which continues to trade at a big premium to other major banks, fell almost two per cent to an intraday low of $165.65 in afternoon trade.

Its rivals were mixed, with Westpac, ANZ and National Australia Bank trading at $37.37, $38.71 and $38.79, respectively.