Banks are granting fewer loans

Mortgage application growth has slowed across the country, according to data released by credit reporting agency Equifax. So what does this mean for you as an investor?

The Equifax report, released in July, shows an annualised 0.9% drop in mortgage applications for the June quarter. The slowdown was particularly notable in New South Wales and Victoria, which have traditionally been the strongest property markets in the country.

While these states still saw a slight increase in the number of applications, it is the second consecutive quarter during which growth has slowed, possibly forecasting a downward trend across the eastern seaboard.

Meanwhile, quite unsurprisingly, in Western Australia and the Northern Territory the cooling housing markets saw the number of applications fall 18.5% and 17.7% respectively.

The knock-on effect of low loan demand

Historically, the tapering off of mortgage application demand has been an indicator of a downturn in property prices in the following six to nine months, so this data has experts speculating that Victoria and New South Wales will soon follow suit.

This could be great news for prospective buyers, as it may mean increasing affordability is on the horizon, and signal that the housing boom is finally slowing down in our most expensive cities. It also gives buyers the upper hand when applying for loans, as fewer applications mean that lenders will be vying for your business.

Over the same period, applications for consumer credit rose – up 10.3%, with a big increase in the number of people applying for personal loans. Property buyers who stay away from consumer credit loans are more favourable candidates for the banks, when applying for home loans, compared to those who have multiple debts - not to mention their increased borrowing power.

So, what can you do to take advantage of the current climate, and maximise your chances of securing a home loan?

  • First, check out your credit rating – it’s free to do this and takes just a few minutes online. If there are outstanding defaults or negative repayment histories, contact the creditor and arrange to pay it off and have it removed from your file. Go to
  • Next, pay off existing debts and credit cards – these reduce your borrowing power. Once your credit card is paid off, call your bank and either cancel the card, or have the limit reduced as low as possible. Your mortgage provider will take the limit on the card, not just how much you owe, into account when assessing how much you can afford to repay.
  • Finally, show the bank you can repay the loan. Draw up a budget, including your income and expenditure. You’ll need to demonstrate that you are able to meet the repayments without putting yourself into financial stress. If you’re currently paying rent and saving, you’re already on the front foot – many banks will accept that you can afford to repay an amount equivalent to your rent plus regular savings. If you’re living at home, consider stashing extra into savings each month to illustrate your capacity to repay.

Then, consider where your deposit is coming from. If a large chunk of it has been a gift or inheritance, it will need to sit in your account for at least 3 months before most banks will consider it to be genuine savings. If you’re saving it yourself, consider bumping up your regular savings as much as you can, as a larger deposit will come in handy when you are negotiating terms and interest rates with your lender.