Mortgage brokers face worst slump in a decade as Australian property market cools

Mortgage brokers across Australia are watching the phones ring less and less. Since the May Federal Budget, applications for new home loans have collapsed—Westpac saw a 20 percent drop, Commonwealth Bank fell 15 percent—and the ripple effect through the brokerage industry has been swift and brutal. Some brokers have lost more than half their business in what they're calling the worst downturn in a decade.

Prakash Rai, a senior mortgage broker at Home Loan Experts, describes a market that has simply stalled. Sellers are pulling properties off the market rather than face a buyer's market. Without sales, there's no new inventory. Without new inventory, there's no urgency to buy. The cascade is straightforward and devastating. "There's not much transaction happening at the moment," Rai said. "People aren't selling and because they aren't selling, there's not many new stock in the market." Both first-time buyers and investors have retreated, but the investor segment has been hit hardest—borrowers who once had access to substantial lending capacity now find themselves locked out.

Craig McDonald, a broker at CBM Mortgages, has watched the market from the inside for 15 years. He calls the current climate the quietest he's ever seen it, with new client inquiries down at least 50 percent. Investors are letting their pre-approvals expire, betting that conditions will improve before they commit. One of his clients made the decision to rent for another year rather than buy—a telling sign that confidence has evaporated. The pain isn't confined to Sydney or any single city. "It's everywhere," McDonald said. Buyer's agents, the professionals who help clients navigate purchases, are feeling the squeeze too.

With new lending dried up, the industry has pivoted to refinancing—helping existing borrowers switch to better rates with competing lenders. Behind the scenes, Australia's major banks are engaged in an aggressive campaign to poach customers from rivals. Stephen Southworth, owner-manager of Mortgage Choice, describes banks offering rates that never appear on their public websites, instead funneling special deals through brokers in a bid to retain market share. "They're working really hard stealing business from each other," Southworth said. His own firm has recorded a nearly 30 percent drop in new home loan applications since May. Rai confirmed that lender retention teams have become noticeably more aggressive, cutting prices in a desperate attempt to hold onto clients as overall application volume collapses.

One unexpected surge has partially offset the gloom: self-managed superannuation fund (SMSF) loans skyrocketed in the weeks before a new ban took effect on August 10. From that date forward, SMSFs can no longer enter into new loan agreements to purchase or build residential property. Borrowers rushed to beat the deadline, hoping to grandfather existing arrangements. Non-bank lenders wrote more than 16,000 residential loans to SMSFs in the year ending June 30—a last-minute flood that provided temporary relief but cannot sustain the industry long-term.

All three brokers interviewed expect the downturn to persist for months. The industry that profits from mortgage approvals is now bracing for an extended drought. Southworth acknowledged that the landscape has fundamentally shifted. "It just won't be the same as it was before because it's not as attractive to buy an investment property," he said. There is a glimmer of hope: first-home buyer schemes exist and may eventually drive demand once the market stabilizes and awareness spreads. But that recovery remains distant and uncertain. For now, mortgage brokers are waiting—and hoping the phones start ringing again.