Mortgage demand in ‘significant decline’

First home buyer (FHB) activity has followed the same pattern but with a steeper drop‑off as rates have climbed.

New mortgages for FHBs were up 7.1 per cent in January, yet have since recorded a 9.1 per cent fall in May.

Refinancing, which has been a key driver of mortgage flows through the rate‑hike cycle, is also fading.

Total refinancing demand was 12.4 per cent higher in January but was 5.6 per cent lower by May.

Within that, refinances with the same lender dropped from a 16.2 per cent increase in January to a 7 per cent fall in May, while switches to a different lender went from an 8.6 per cent rise to a 4.2 per cent decline over the same period.

Executive general manager Moses Samaha said the figures confirmed that the Reserve Bank’s recent tightening run had significantly impacted growth.

“Last month I observed that we were beginning to see a ‘slight handbrake’ on mortgage demand, and this month after three successive rate hikes, the impact has well and truly hit with an observed significant decline,” he said.

State and age breakdowns reveal breadth of weakness

The May figures also revealed that the slowdown is geographically broad-based.

New FHB mortgages declined in every major state: down 16.2 per cent in Queensland, 15.3 per cent in Victoria, 12.3 per cent in NSW, 11.9 per cent in South Australia, and 8.4 per cent in Western Australia.

Total refinancing also fell in all states, including an 11.6 per cent drop in Victoria, 11.5 per cent in South Australia, 9.2 per cent in NSW, 8.8 per cent in Queensland, and 7.9 per cent in Western Australia.

Samaha said the deterioration, which started in Victoria, had now spread across the entire country.

“We’ve observed that Victoria has seen negative pockets of mortage demand since February 2026, but now this has broadened across all states and territories at differing levels,” he said.

By age, the pullback is just as extensive.

Comparing May 2026 to a year earlier, new mortgage demand was down 11.2 per cent among 18–25‑year‑olds, 16.3 per cent for the 26–35 age bracket, 12 per cent for 36–45-year-olds, 11.9 per cent for the 46–55 category, and 13.5 per cent for those aged 56–65.

“Demographically, the only age group to experience any positive demand growth YoY in May was the 65+ demographic, who saw a minor +3.3 per cent YoY uptick in refinancing with a different lender,” Samaha said.

FHB resilience ‘washed out’

Equifax’s earlier 2026 data showed FHBs holding up surprisingly well despite higher rates, supported by the federal government’s expanded 5 per cent deposit guarantee.

That resilience now appears to have faded, with Samaha saying that policy support is currently being overtaken by servicing realities.

“After successive rate hikes, those initial government boosts have been washed out by the realities of a high-rate market,” Samaha said.

Confidence and serviceability weighing on refinancing

In a typical rising‑rate cycle, refinancing tends to spike as borrowers shop around for a sharper deal, yet the latest Equifax snapshot has shown the opposite, with both internal and external refinancing volumes falling into negative territory year on year.

Samaha believes this reversal says as much about household confidence and borrowing capacity as it does about rate levels themselves.

“This drop could indicate consumer confidence is hitting a wall. Plus, with rates where they are, many people might actually be stuck. They want to refinance, but cost-of-living pressures and new loan serviceability criteria might be impacting their ability to refinance,” he said.

That dynamic suggests a growing subset of borrowers may be ‘mortgage prisoners’ – wanting to switch lenders or consolidate debts, yet are unable to pass current assessment tests.

[Related: ANZ flags mortgage slowdown as Westpac sees demand slip]