Property

First home buyers pull back as average loans hit record highs

Australian mortgage demand fell 19.2 per cent year on year in September, its weakest result since October 2022, according to Equifax.

Buyers watch an auctioneer outside a house in Sydney

Buyers and neighbours at a house auction in Sydney. Digitally illustrated image.

By Bushletter Newsroom · 15 October 2026

TLDR

Australian mortgage demand fell 19.2 per cent year on year in September 2026, the weakest result since October 2022, according to Equifax. First home buyers bore the heaviest losses, with demand down more than 22 per cent even as the average loan for that cohort reached a record $743,000.

Sixth straight monthly fall, deepest since 2022

Australian mortgage demand fell 19.2 per cent year on year in September 2026, the sixth consecutive monthly decline and the weakest reading since October 2022, according to Equifax Consumer Market Pulse data released on 13 October 2026.^[1] The result sharpened from August's 14.1 per cent annual drop, pointing to a deterioration in borrowing conditions across the September quarter.

Kevin James, Chief Solution Officer at Equifax Australia, said the data showed a decisive shift in household behaviour, with Australian households stepping back from expanded debt commitments in a sustained high-rate environment.^[1]

First home buyers and young Australians hardest hit

First home buyer mortgage demand fell more than 22 per cent year on year in September 2026, the largest annual decline for that cohort since December 2022.^[1] The retreat came as the average first home buyer loan reached a record $743,000 in the same month.

Demand among Australians aged 18 to 25 fell 25 per cent year on year, a cohort for whom the average first home buyer loan stood at $634,000.^[1] For the 26-to-35 age group, the average loan was $736,000, reflecting how far prices have shifted even as demand contracts.

Investors and refinancers also pull back

Investor mortgage demand fell 18 per cent year on year in September 2026, broadly tracking the overall market decline.^[1] Refinancing activity split along sharp lines: external refinancing applications fell 8.8 per cent, while internal refinancing collapsed 28 per cent year on year.

James said regulatory settings were a central factor keeping existing borrowers in place. "In the current economic climate, strict regulatory serviceability assessments appear to be holding borrowers in place. Many existing mortgage holders wanting to shop around for a better rate are likely finding themselves unable to clear the serviceability needed, effectively locking them into their current arrangements," James said.^[1]

Since 2021, APRA has required authorised deposit-taking institutions to apply a mortgage serviceability buffer of at least 3.0 percentage points above the loan interest rate when assessing all new applications.^[3] With the cash rate at 4.60 per cent, a borrower seeking a typical variable rate faces an assessment rate above 8 per cent before a single dollar is lent.

Rate rises add to the pressure

The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.60 per cent at its meeting on 29 September 2026, its fourth increase of the year.^[2] The RBA said at that meeting that housing prices had fallen in most capital cities and new housing loans had declined noticeably.

Demand for credit cards rose 10 per cent year on year in September 2026, even as mortgage appetite contracted.^[1] Credit card demand among Australians aged 56 and over jumped 36.3 per cent, a divergence pointing to different financial pressures across age groups. The September data largely predates the RBA's 29 September rate rise.

KEY TAKEAWAYS

01Mortgage demand dropped 19.2 per cent year on year in September 2026, steeper than August's 14.1 per cent fall.

02First home buyer demand recorded its largest annual decline since December 2022, falling more than 22 per cent.

03The average first home buyer loan hit a record $743,000, while demand among 18-to-25-year-olds dropped 25 per cent.

04Internal refinancing fell 28 per cent; Equifax says serviceability rules are holding borrowers in place.

05Credit card demand surged 36.3 per cent among Australians aged 56 and over, even as mortgage demand fell.

This article contains analysis and commentary on market conditions. It does not constitute financial, investment, or professional advice. Past performance is not indicative of future results. Always consult a qualified adviser before making financial decisions.

SOURCES & CITATIONS

FREQUENTLY ASKED QUESTIONS

Why is mortgage demand falling so sharply in Australia?

Four RBA rate rises in 2026, lifting the cash rate to 4.60 per cent, combined with APRA's mandatory 3.0 percentage point serviceability buffer, have made it harder for borrowers to qualify for new loans or to refinance existing ones.

How does the serviceability buffer affect existing borrowers?

APRA requires lenders to assess new mortgage applications at a rate at least 3.0 percentage points above the loan's interest rate. Kevin James of Equifax Australia said this is effectively locking many existing mortgage holders into their current arrangements, even when they want to switch to a better rate.

What happened to first home buyer demand?

First home buyer mortgage demand fell more than 22 per cent year on year in September 2026, the largest annual decline for that cohort since December 2022, according to Equifax. The average first home buyer loan simultaneously reached a record $743,000.