Commonwealth Bank of Australia loan applications had been falling since October because of affordability constraints, high inflation, three interest rate hikes and an oil shock, chief executive Matt Comyn told an earnings briefing on Wednesday.
But after the Albanese government made changes to capital gains tax concessions and negative gearing for property investors in the May budget, mortgage applications fell further.
Investor applications dropped 28 per cent, while those by owner-occupiers fell nine per cent, for an overall fall of 15 per cent compared to the same period in 2025.
Mr Comyn said applications had ticked up again after hitting a nadir in the last week of June and the bank expected a total drop of four or five per cent during 2026/27.
"And we expect an improvement into the later stages of FY2027," he said.
"Clearly, there's likely to be some volatility and, like many markets, it can be quite sentiment-driven."
The nation's largest bank believes the most likely scenario for interest rates is that the Reserve Bank of Australia will keep rates on hold for the rest of the year and then cut in 2027, which would spur demand for home loans.
But Mr Comyn noted opinions varied on where interest rates would go next.
Some economists believe another rate hike is possible, as central bank governor Michele Bullock indicated on Tuesday.
Mr Comyn said the bank expected a reduction in refinancing, as well as lending for subsequent purchases.
The Commonwealth Bank has also reported a slight fall of $3 billion in offset account balances in the past six months, to $94 billion, suggesting households are feeling the pinch of high living costs.
However, account balances were still more than double the figure from mid-2019.
The number of customers behind on their home loan payments has also ticked up, albeit from a low level.
The bank reported a statutory full-year net profit of $10.9 billion, up seven per cent from the previous year, on a seven per cent boost in revenue to $30.2 billion.
Cash net profit - its preferred measure of profitability - came in at $11 billion, up seven per cent.
The bank grew all five of its core domestic products - home lending, business lending, consumer finance, household deposits and business products - at the same level or better than that in the overall banking system.
"It is the first time CBA has achieved this and the first time any major Australian bank has done so in the past 15 years," Mr Comyn said.
VanEck senior portfolio manager Cameron McCormack said the bank's headline numbers were impressive, but he pointed to the fall in mortgage applications as a deteriorating forward indicator.
"Westpac sounded a similar warning earlier this week," he noted.Â
"That tells us the mortgage market is losing momentum and the banks are starting to feel it."
The Commonwealth Bank also released its annual report, disclosing that Mr Comyn earned total compensation of $8.4 million in 2025/26.
Shares fell by just over one per cent to $171.93 in afternoon trading.
The bank declared a final dividend of $2.70, taking the total for the year ending June 30 to $5.05, which was a four per cent improvement on the prior year.
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