Budget Reforms Spark 20% Home Loan Application Drop: Westpac

The federal budget's property tax reforms have led to a significant drop in home loan applications, according to Westpac. The bank reported that home loan applications have fallen by up to 20% since May's budget announcement, with investor demand expected to halve in the next two years.

In its quarterly report, Westpac stated that home loan applications dropped by 11% since the start of the second quarter and 20% in the last three months. The bank attributed this decline to both the budget reforms and external factors such as interest rates.

Westpac's chief financial officer, Bruce Goonan, said that the mortgage market is experiencing a period of 'real dislocation' due to the budget changes and rising interest rates. He added that there was still uncertainty about future interest rate movements, with experts predicting no change when the Reserve Bank of Australia meets on Tuesday.

Goonan suggested that if interest rates were cut, it could have an impact on the mortgage market as investors remain cautious. The bank expects the value of home loans to fall from 6.2% to 4.7% in the next year before rising slightly to 5.2%.