FHB slump intensifies as mortgage demand sinks

The ACT recorded the sharpest fall, with demand down 17.6 per cent, followed by NSW at 15.9 per cent and Queensland at 14.7 per cent.

Demand fell 13.7 per cent in South Australia and 12.8 per cent in Victoria, while Western Australia was the most resilient market, albeit still down 10.43 per cent.

First home buyer freeze worsens

The deterioration was more pronounced among FHBs, whose mortgage demand plunged 20.1 per cent nationally compared with August last year.

Queensland and NSW led the decline, falling 22.6 per cent and 22 per cent, respectively.

Victoria recorded an 18.2 per cent drop in FHB demand, followed by Western Australia at 18.4 per cent, South Australia at 15.9 per cent, and the ACT at 15.5 per cent.

The data points to a rapid loss of momentum among a cohort that had shown stronger activity earlier in 2026, especially after the expansion of the federal government’s 5 per cent deposit scheme in October 2025.

Overall mortgage demand among 18–25-year-olds fell 21.7 per cent in August, while demand from 26–35-year-olds dropped 18.1 per cent.

The decline has occurred even as the debt required to enter the market remains elevated.

Equifax said the average FHB mortgage size was holding at a record high of $740,000, while the average was $622,000 among 18–25-year-old first home buyers and $734,000 among borrowers aged 26–35.

Kevin James, chief solutions officer at Equifax, said the August data reflected households’ response to a prolonged high rate setting.

“Pulse data for August 2026 highlights a market adjusting to a sustained higher interest rate environment, with many expecting at least another rate increase before the end of the year,” he said.

“While overall mortgage demand remains down, it is positive in some respects to see it has not continued its downward trajectory from the past few months and has softened slightly.”

He added that consumer caution appeared to be reshaping borrowing decisions, with households placing more emphasis on managing near-term financial pressures.

“However consumers still appear to be apprehensive, with households appearing to be actively re-evaluating their commitments, choosing to hold off on taking on massive new capital obligations while using short-term and unsecured credit to maintain household finances,” James said.

Investor demand also remained negative, falling 11.4 per cent year on year in August, although that was less severe than the 15.1 per cent decline recorded in July.

Refinance split widens

Yet in contrast to mortgage demand, refinancing activity showed a more divided picture.

Refinancing with a different lender was nearly flat, down 0.8 per cent year on year, after falling 8.4 per cent in July.

Western Australia, up 2.3 per cent, and Queensland, up 1 per cent, returned to growth, while the ACT fell 12.7 per cent, and South Australia declined 7 per cent.

Older borrowers drove the external refinance rebound, with switching activity rising 13.3 per cent among 56–60-year-olds and 9.2 per cent among borrowers aged 60 and over.

By comparison, switching among 26–35-year-olds fell 9.4 per cent.

Refinancing with the same lender, however, dropped 23 per cent nationally.

NSW recorded the sharpest state decline at 28.3 per cent, while Western Australia was the least negative at 15.9 per cent. Demand among 36–45-year-olds fell 25.6 per cent.

James said external refinancing had stabilised as borrowers continued to seek sharper pricing, yet added that the FHB market had moved in the opposite direction.

“Refinancing with the same cannot be said in the first home buyers mortgage market, which deepened further in August. Younger Australians continue to be the most impacted amid current market conditions and cost of living constraints,” he said.

“Notably this is the largest year on year decline we’ve seen among FHBs since 2022.”

[Related: Cash flow crunch fuels investor retreat as sentiment collapses]