ANZ's Third-Quarter Result and the Mortgage Slowdown

ANZ has become the third major Australian bank to report a sharp slowdown in mortgage applications since the federal government's May budget, saying the value of home loan applications fell 12% from the budget announcement through the end of July. The fall excludes loans under the government's 5% deposit scheme, meaning underlying private mortgage demand has cooled more sharply than headline loan growth suggests.

The quarterly result was otherwise modest. Cash profit rose 1% against the third-quarter average to $1.9bn, while statutory profit was $1.95bn. ANZ said Australian retail home loans on its books rose 2% to $355bn during the quarter, but application values fell 5% quarter-on-quarter. Customer savings and transaction account balances dropped 1%.

Chief executive Nuno Matos said the bank remained on track for its profitability and cost-cutting targets, including full-year costs down 5% year on year. The result also included a provision related to a New Zealand class action. IG analyst Tony Sycamore described the quarter as steady but unspectacular and pointed to early signs of housing stress, with Australian loans 90-plus days past due rising to 86 basis points.

What the Application Drop Reveals About Housing Demand and Bank Margins

Why Mortgage Applications Are Falling

The 12% decline in application values since the May budget is not incidental. ANZ, Commonwealth Bank and Westpac have each linked weaker mortgage demand to the government's negative gearing and capital gains tax changes. Those reforms reduce the after-tax appeal of leveraged residential property investment, so fewer would-be investors are submitting loan applications. This points to a demand slowdown concentrated in private mortgage activity rather than a collapse in credit availability.

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The 5% Deposit Scheme Is Masking the True Cooling

ANZ's figures expose a gap between reported lending growth and underlying demand. Home loan balances still rose 2% in the quarter, but excluding mortgages supported by the federal government's 5% deposit scheme, application values fell 5% quarter-on-quarter and 12% from budget night to end-July. A government-backed channel is therefore holding up headline activity while private application values weaken. That matters because scheme-backed loans can carry different pricing and risk profiles, and their flow depends heavily on policy settings.

Early Signs of Stress Are Showing in Arrears

The rise in loans 90-plus days past due to 86 basis points is an early but concrete signal that some existing borrowers are struggling with higher interest rates. A single quarterly reading is not yet a trend, but it aligns with the analyst observation that mortgage holders are finding conditions tougher. If arrears keep rising, bank provisions are likely to increase, offsetting some of the benefit from a slightly higher net interest margin.

Margins and Cost Cuts Are Doing the Heavy Lifting

ANZ's modest profit growth was supported by a stronger net interest margin, accelerating business banking volumes and an ongoing productivity program, not by home lending. That explains why the result was called unspectacular: profitability is being sustained by efficiency and pricing while the housing engine cools. If application weakness persists, future revenue growth will depend more on business lending and margin management than on mortgage volume.

What Investors and Rivals Should Watch Next

For investors and market watchers, the key number is not the 1% cash profit increase but the underlying application trend: a 12% drop between budget night and end-July excluding the government-backed scheme. ANZ has committed to a 5% year-on-year cost decline and full-year return on tangible equity and cost-to-income targets, so the next full-year result will show whether efficiency gains can offset weaker mortgage intake.

  • Track future application values, not just loan balances. Balances rose 2% because existing loans remain on the books, but applications lead future lending and fell 5% quarter-on-quarter excluding the 5% deposit scheme.
  • Treat ANZ's return to system home lending growth cautiously. System growth is being supported by the government's 5% deposit scheme, while private application demand is down 12% since the tax changes.
  • Watch the 90-plus day arrears trend. The rise to 86 basis points is a single-quarter signal, but if it continues into the next reporting season, bank bad-debt charges are likely to rise.
  • For rivals, CBA and Westpac have already shown the same pattern. This is not an ANZ-specific execution problem; it is an industry-wide response to negative gearing and capital gains tax changes.

Risk & Opportunity Assessment

Commercial RiskMediumHome loan application values fell 12% from the May budget through end-July excluding the 5% deposit scheme, while customer savings and transaction balances dropped 1% and cash profit rose only 1%.
Competitive RiskMediumANZ is the third major bank after Commonwealth Bank and Westpac to report weaker mortgage demand, creating an industry-wide slowdown that could intensify competition for the shrinking pool of private home loan applications.
Regulatory RiskMediumNegative gearing and capital gains tax changes are directly reducing mortgage demand, and the growing role of the federal government's 5% deposit scheme makes ANZ's home lending increasingly sensitive to future housing policy decisions.
Reputation RiskLowThe result was described as 'unspectacular' and a New Zealand class action provision weighed on profit, but there is no evidence of a major reputational event in this update.
Technology DisruptionLowThe update focuses on home loan demand, tax policy and cost-cutting rather than technology, though productivity and simplification initiatives remain part of ANZ's strategy.
Commercial OpportunityMediumANZ reported accelerating business banking volumes, a slightly higher net interest margin and a 5% year-on-year cost reduction target, which may partly offset softer mortgage growth.