Big four bank NAB’s mortgage applications tumble after Albanese government’s shake-up of tax rules

In a further sign of a slowing Australian housing market and lingering concerns about the Albanese Government’s radical shake-up of property tax rules, big four bank NAB has reported a 15 per cent fall in the number of mortgage applications over the past three months.

The value of those applications also slumped 9 per cent between March and the end of June.

While Perth house prices remain resilient and are tipped to keep growing, the bigger Sydney and Melbourne markets continue to suffer.

Cotality figures showed capital city values fell 1.3 per cent over the June quarter, led by declines of 3.2 per cent in Sydney and 2.6 per cent in Melbourne. Perth values still rose 0.7 per cent in June.

Despite the drop in new applications, NAB’s existing mortgage book continued to grow, rising 2 per cent to $115 billion over the quarter and 6 per cent over the year.

The two measures can move in opposite directions because applications point to future lending while balances include loans already settled and still being repaid, suggesting Labor’s May Budget marked the turning point.

The housing retreat contrasted with continued growth in business borrowing, with NAB’s Business and Private Banking lending balances rising 4 per cent, or about $6b, to $180b.

That put the business lending book 10 per cent above its level a year earlier and delivered NAB’s strongest June month since the 2022 financial year. Growth was spread across trade, manufacturing, construction, accommodation and cafes.

“Business and private banking has continued to perform well in a challenging economic environment,” said group executive B&PB, Andrew Auerbach.

“It’s pleasing to see the resilience of our business customers who continue to find opportunities to grow and innovate.”

The figures provide a broad reading on small and medium-sized businesses, with NAB backing about one in four Australian SMEs.

However, signs of strain are emerging beneath the lending growth. The bank’s “watch loans” — loans under closer scrutiny for early signs of borrower stress — increased 8 per cent over the quarter, reflecting “current and potential impacts from a challenging environment”.

NAB said these troubled loans continued to increase among construction and transport and storage borrowers exposed to the fallout from the Middle East conflict.

Still, the pressure has not yet translated into a broader jump in bad debts, with the share of business loans in default or considered unlikely to be repaid edging down from 3 per cent to 2.91 per cent.