Demand for mortgages slumps in June as tax changes and interest rates bite

Demand for new home loans in Australia dropped significantly in June, as a combination of higher interest rates and new federal tax policies cooled the housing market. Data from the past month shows that both auction clearance rates and overall sales activity have softened, marking a clear shift from the high-growth environment seen in previous years. The Reserve Bank of Australia has raised the official cash rate three times this year to 4.35%, increasing the cost of borrowing for households and dampening buyer confidence. This financial pressure is now compounded by major changes to property tax settings announced in the federal Budget. These reforms restrict negative gearing—which allows investors to deduct rental losses from their taxable income—to new builds only, and replace the flat 50% capital gains tax discount with an inflation-based indexation model. While these changes are designed to influence long-term market behavior, their immediate effect has been a sharp reduction in investor participation. Many prospective buyers are now adopting a wait-and-see approach, leading to a decline in mortgage applications and a cooling of price growth across major capital cities. As the market adjusts to these dual pressures, industry experts are closely watching the Reserve Bank’s upcoming August meeting to see if the central bank will maintain its current stance or signal a change in direction. For now, the combination of tighter lending conditions and policy-driven shifts has created a more cautious environment for both investors and first-home buyers.