Commonwealth Bank home loan applications fall 15pc since May

Australia's largest home lender, Commonwealth Bank (CBA), has experienced a significant 15% decrease in home loan applications since May. This downturn in the housing market is linked to a series of interest rate increases and recent federal budget changes that have affected property investors.

The federal budget, handed down in May, introduced sweeping changes to property taxation rules. Notably, it restricted negative gearing benefits to newly built properties for investors. Additionally, the 50% capital gains tax discount was abolished and replaced with an inflation-indexed discount, while a 30% minimum tax rate on net capital gains was implemented, potentially increasing tax burdens for property sellers.

The timing of the market slowdown also coincides with three interest rate hikes by the Reserve Bank of Australia in February, March, and May. These factors have collectively contributed to a softening of housing activity, although CBA's chief executive, Matt Comyn, noted that application volumes appear to have stabilized in recent weeks.

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Housing activity has softened from a high base. Application volumes appear to have stabilised in recent weeks.

Despite the challenges in the housing market, Commonwealth Bank reported a 7% increase in net profit for the last financial year, reaching $10.9 billion. Shareholders will receive a final dividend of $2.70 per share. However, the bank's net interest margin saw a slight decrease, and operating expenses rose by 6%, driven by inflation, technology investments, and efforts to combat fraud and financial crime.

Looking ahead, Mr. Comyn expressed a cautious outlook, stating that economic growth is slowing. He indicated that higher interest rates and inflation are placing uneven pressure on household incomes and overall economic activity. CBA noted that its growth across its five major divisions, home lending, business lending, consumer finance, household deposits, and business deposits, has kept pace with or exceeded the broader banking system.

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growth is slowing, with higher interest rates and inflation placing uneven pressure on household incomes and economic activity