Westpac on Monday reported results for its third quarter, which included the May federal budget announcements outlining changes to capital gains tax concessions and negative gearing restrictions.
An undersupply of housing, combined with population growth, was expected to partially offset the impact of higher rates and Labor's policy changes, the bank said.
However, it also expects housing credit growth to moderate to 4.7 per cent in fiscal 2027, from 6.8 per cent in its current financial year.
A sharper fall-off in investor loan applications was noted to 4.5 per cent next year, from 9.1 per cent this year.
The bank had an average of 29,000 mortgage applications a month in the quarter.
But looking at its post-budget run rate, the decline was 20 per cent between May 15 to July 31, after the budget was released on May 12.
For the quarter, Westpac reported an unaudited bottom-line net profit of $1.8 billion, up two per cent on the two-quarter average in the first half of fiscal 2026, after excluding notable items.
"We have a strong balance sheet and are focused on supporting our customers through uncertainty while delivering sustainable returns," chief executive Anthony Miller said.
"While many households are feeling the impact of cost-of-living pressures, businesses are investing and our customers have continued to show resilience."
Westpac reports its full-year results in November.
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