Westpac’s third quarter update has revealed that a sharp post-budget slowdown is reshaping the banks mortgage pipeline and the makeup of new lending.
Westpac has reported a significant post-budget drop in mortgage applications and a reduced proprietary-channel share of new lending, even as it settled $33.3 billion in mortgages in the June-quarter period.
Average monthly mortgage applications fell 11 per cent quarter-on-quarter to 29,000 in 3Q26, with the run-rate declining even further after the federal budget to 26,000 applications - 20 per cent below the 2Q26 level.
The slowdown was more pronounced in the investor segment, with the bank noting that investor applications had dropped 26 per cent since the budget, compared with an 18 per cent fall in owner-occupier applications.
Westpac chief financial officer Nathan Goonan said the results reflected a housing finance market adjusting to policy changes and a higher interest-rate environment.
“You’ve got a mortgage market that has got a period of real dislocation, whether it be through the budget changes, and then through rates,” Goonan said.
The bank’s June-quarter mortgage flows (new mortgages settled in the three months to 30 June) totalled $33.3 billion, with the average loan size at $553,000.
Owner-occupiers made up 61 per cent of new flows, while investors accounted for 39 per cent.
The investor proportion was above the 32.6 per cent share of the June loan book, while the owner-occupier share was below the 66.7 per cent recorded in that balance.
Goonan said the sharper fall in investor demand had not yet been offset by first-home buyers (FHBs), despite their share of new flows edging higher.
“We are seeing investor [applications] down more than owner-occupied. We haven’t necessarily seen first home buyers pick up the slack yet. But we would be cautious about drawing too many conclusions at this point in the cycle,” he explained.
FHBs accounted for 13.3 per cent of new quarterly mortgage flows, up from 12.4 per cent of the June balance.
Channel and loan mix shift
The quarterly update also revealed that the proprietary channel generated 36.1 per cent of Westpac’s new mortgage flows during the quarter, down from 41.7 per cent of the June 2026 balance and 43.4 per cent of the June 2025 balance.
Variable-rate lending remained dominant, representing 93 per cent of new mortgage flows, while fixed-rate loans made up the remaining 7 per cent, higher than their 5 per cent share of the June loan book.
Interest-only lending also represented a larger proportion of recent new business than of the existing book and comprised 21.9 per cent of new flows, compared with 13 per cent of the June balance.
Customers remain resilient says Westpac
While Westpac’s application data revealed a softer near-term pipeline, the bank said many existing mortgage customers had retained repayment buffers.
At June, 27 per cent of mortgagors were at least two years ahead on repayments, while a further 19 per cent were between six months and two years ahead.
A total of 12 per cent were up to six months ahead, 18 per cent were a month ahead, 14 per cent were on time with repayments and 1 per cent were behind.
Westpac chief executive Anthony Miller said the bank was seeing resilience among both household and business customers despite persistent cost-of-living pressures.
“While many households are feeling the impact of cost of living pressures, businesses are investing and our customers have continued to show resilience,” Miller said.
Westpac reported 30-plus-day delinquencies of 1.14 per cent and 90-plus-day delinquencies of 0.58 per cent at June.
Gross loans stood at $908 billion at June, up from $890 billion at March and overall lending increased by 2 per cent over the quarter, with business lending up 4 per cent and housing lending rising 2 per cent.
Looking ahead, Westpac said it expected housing credit growth to moderate substantially.
The bank is forecasting total housing credit growth of 4.7 per cent in FY27, down from 6.8 per cent in FY26, before lifting to 5.2 per cent in FY28.
Owner-occupier housing credit growth is forecast to slow from 5.7 per cent in FY26 to 4.8 per cent in FY27, while investor credit growth is expected to decelerate more sharply, from 9.1 per cent to 4.5 per cent, before reaching 4.4 per cent in FY28.
[Related: Mortgage demand dives as hardship climbs]
Want to see more stories from trusted news sources?
Make The Adviser a preferred news source on Google.
Click here to add The Adviser as a preferred news source.
