Australia’s biggest home lender ‘CBA’, just posted a bumper profit, but the numbers hiding underneath tell a different story about the state of household finances. Commonwealth Bank reported a $10.9 billion annual profit this week, even as home loan applications through the bank have fallen sharply since May.
Applications Down, Profit Up
The Figures given here aren’t to be ignored:
CBA net profit was just shy of $11 billion and was climbed 7 per cent over the financial year. This gain will be shared given as a final dividend of $2.70 a share to shareholders, which would be a 4 per cent rise in comparison to last year.
But chief executive Matt Comyn was candid about the softer conditions underneath those headline figures, describing housing activity as having eased “from a high base.”
Home loan applications at CBA dropped 15 per cent since May and 17 per cent compared to the same period a year earlier. It’s not an isolated trend either – Westpac has reported a 20 per cent decline in applications over a similar window, while NAB flagged a 15 per cent fall since the end of March. Investor lending has taken the biggest hit at CBA, plunging 28 per cent, while owner-occupier applications slipped a comparatively modest 9 per cent.
Why the Federal Budget Matters Here
Much of the slowdown traces directly back to changes unveiled in this year’s federal budget, handed down on May 12. The federal budget overhauled property taxation rules, limiting negative gearing to newly built properties and axing the 50 per cent capital gains tax discount in favor of an inflation-indexed system last used before September 1999. A new 30 per cent minimum tax rate on net capital gains was also introduced; meaning investors selling property could face a heavier tax bill under the new regime.
Existing investors weren’t left completely exposed – those who already owned property before the federal budget can still deduct net rental losses against other income. Still, the timing compounded an already jittery market: three interest rate hikes delivered across February, March and May, with the final rise landing just a week before the budget itself, and home loan applications continuing to slide through the following months.
Interest Rate Outlook and What Comes Next
Commonwealth Bank is now forecasting the cash rate will hold steady at 4.35 per cent for the remainder of 2026, with the possibility of a couple of cuts arriving in 2027. Comyn said he expects some buyers to return to the market once those cuts start to look more certain, and noted that application volumes had already begun stabilizing in recent weeks, with early signs of improvement emerging in August.
The operating expenses rose by 6 percent, which is $13.76 billion, CBA’s net interest margin also slipped a bit, 2.05per cent. Hence, there is a very small gap between what the bank earns on loans and what it pays back on deposits. This was mainly because of inflation but also due to investments in fraud prevention technology.
The results also revealed that there was some slight increase in troubled loans, with troubled and non-performing exposures increasing to 0.94 per cent of the portfolio from 0.89 per cent a half-year earlier, but negative equity in the mortgage portfolio remained low. Despite the decline in overall volumes, broker-originated lending increased to 49 per cent of new business, up from 46 per cent a year ago.
A National Story with Local Ripples in WA
While the headline numbers are national, the pressures from the federal budget and this year’s interest rate hikes are playing out unevenly across Australia. Western Australia has actually bucked some of the softness seen elsewhere, with the WA government pouring a record $4.7 billion into housing this budget cycle and building approvals climbing to more than 25,000 homes over the year. Commonwealth Bank customers in WA will also soon get access to the federal Help to Buy scheme, a shared-equity program already running in most other states of Australia, with the rollout expected to reach WA sometime in 2026.
That kind of state-level support is a reminder that even as CBA and its rivals brace for a quieter mortgage market nationally, conditions in WA and other resource-rich states can diverge sharply from the eastern capitals, where prices have started slipping month on month.
Matt Comyn struck a measured tone on the broader outlook, saying growth is slowing and that higher interest rates and inflation are placing uneven pressure on household incomes, from WA to the eastern states of Australia. Even so, CBA said it grew at or above the pace of the wider banking system across all five of its major divisions – the first time any major Australian bank has managed that feat in 15 years, and proof that even in a cooling housing market, the country’s biggest lender isn’t short on runway.