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QUICK SUMMARY
- Housing slowdown: NAB has warned that post-budget changes are creating a second-wave shock, with the full impact still unfolding.
- Falling applications: NAB home-loan applications fell 16% in Q2, while Westpac reported an approximately 20% decline since the budget.
- Commercial divergence: Business credit growth has outpaced housing credit, suggesting lenders are still interested in quality commercial and business lending.
- Selective lenders: Banks may tighten serviceability and become more selective, even where commercial appetite remains strong.
- Practical response: Prepare signed lease schedules, recent entity statements, up-to-date financials and a clear funding story before applying.
- Perth advantage: WA industrial property continues to benefit from tight vacancy, rental growth and solid business fundamentals.
THE HOUSING HEADLINE IS LOUD. THE COMMERCIAL STORY IS DIFFERENT.
A housing slump headline is enough to make most borrowers sit up straight. When it comes from a major bank chief executive, the coffee may need a second pour.
But a slowdown in residential lending does not automatically mean commercial borrowers are walking into a credit crunch. The important question is not simply whether banks are lending less overall. It is WHERE they are directing capital, which borrowers they prefer and what evidence they need before saying yes.
NAB CEO Andrew Irvine has warned that recent budget changes are triggering a second-wave demand shock in housing, with the full effects still unfolding. That is a meaningful signal for anyone planning to buy, refinance, expand or acquire a business.
It is not, however, a reason to abandon a sensible commercial plan. It is a reason to sharpen it.
WHAT THE NAB WARNING ACTUALLY SAYS
NAB reported that Australian home-loan applications fell 16% in the second quarter. Investor applications led the decline after the budget, while owner-occupier applications were down 14%.
Other major banks have reported similar pressure. Westpac mortgage applications were reported to be down by approximately 20% since the budget, reinforcing the view that this is not just a NAB-specific wobble.
NAB has also flagged that investor housing credit demand could fall for the first time since 2020. Earlier bank commentary suggested investor housing credit demand could potentially halve over a two-year period.
That is a substantial change in direction. Residential borrowers and property investors are facing higher scrutiny, softer sentiment and a more cautious market.
At the same time, NAB reported third-quarter profit of $1.83 billion, up 2% year on year. Business credit growth also outpaced housing credit in the quarter, indicating that banks remain active in commercial and business lending where the underlying risk and repayment story stacks up.
You can read NAB’s August 2026 Housing Monitor for the broader housing context.
WHY RESIDENTIAL AND COMMERCIAL CREDIT MOVE DIFFERENTLY
Residential and commercial loans may both involve property, but lenders assess them through different lenses.
A home loan is primarily assessed against household income, living expenses, existing debts, credit history and the value of the residential security. Investor lending also depends heavily on rental income and the borrower’s broader financial position.
Commercial lending is more layered. A lender may assess:
- The strength and sustainability of the business cash flow
- The property’s location, use and marketability
- Lease terms and tenant quality
- Net operating income and debt service coverage
- The borrower’s experience and financial position
- The loan-to-value ratio and available equity
- Industry and sector risks
- The proposed exit or refinance strategy
This means a commercial borrower with strong fundamentals can still be attractive even when residential demand is cooling.
A well-leased warehouse in Welshpool, Kewdale, Wangara or Forrestdale is not judged in exactly the same way as an investor apartment in an oversupplied residential market. A profitable business with reliable customers, healthy margins and sensible debt may also present a different risk profile from a household stretching to its maximum borrowing capacity.
That distinction matters. Banks do not lend based on headlines alone. They lend based on risk-adjusted returns, capital requirements and confidence that the borrower can repay.
THE OPPORTUNITY FOR COMMERCIAL BORROWERS
When residential lending slows, banks may have greater reason to compete for well-structured business and commercial opportunities.
NAB’s stronger business credit growth is one sign that lenders are still looking for quality commercial borrowers. It does not mean every application will be approved, or that rates and terms will become automatically cheaper. It means the market is more nuanced than “banks have stopped lending”.
For Perth business owners, the local backdrop may also be supportive.
WA’s industrial sector has continued to outperform many parts of the national commercial market, helped by tight vacancy, strong rental growth and demand linked to logistics, resources, construction, manufacturing and population growth. Industrial assets with practical layouts, good access and credible tenants can remain highly financeable.
That could create opportunities for:
- Owner-occupiers looking to replace rent with long-term property ownership
- Businesses seeking a warehouse or premises that supports expansion
- Investors assessing well-located industrial property
- Business owners refinancing to improve cash flow
- Entrepreneurs pursuing acquisition finance for a profitable business purchase
The key is not to confuse lender appetite with a green light to overpay or over-borrow. A quality asset at an uncomfortable price is still an uncomfortable asset.
THE PLAYBOOK: 5 STEPS TO POSITION BEFORE YOU APPLY
1. AUDIT YOUR POSITION
Start with your goals, not a particular lender or advertised interest rate.
Are you buying premises, refinancing existing debt, releasing equity, funding equipment or supporting working capital? Decide what success looks like and how the proposed loan fits your personal and business risk appetite.
Review your current debts, repayment schedules, available equity, tax obligations and near-term cash requirements. Identify any upcoming changes, such as lease expiries, major equipment purchases or a planned acquisition.
A clear position makes it easier to select the right structure and avoid borrowing more than the business genuinely needs.
2. FRONT-LOAD YOUR DOCUMENTATION
In a selective lending market, incomplete paperwork is not a minor inconvenience. It can push your application to the bottom of the pile.
Prepare the important documents before lodging:
- Be ready for the lender’s valuation — the bank arranges and pays for this through its panel, so provide valuer access when requested
- Signed lease schedules and copies of current leases
- Recent entity statements
- Up-to-date financial statements and tax returns
- Current management accounts
- Business and personal asset and liability statements
- Existing loan statements
- Details of guarantees and related-party transactions
- A clear explanation of the purpose of the funds
For commercial property, lenders will want to understand both the property and the income supporting it. Signed lease schedules, rent evidence, outgoings and tenant information can make a material difference.
Good documentation does not guarantee approval. It does make it easier for a lender to understand the application without playing detective.
3. FIX THE STRUCTURE BEFORE YOU APPLY
A strong application can be weakened by a poor structure.
Consider whether the loan should be interest-only or principal-and-interest, fixed or variable, limited recourse or supported by broader guarantees. Review entity ownership, security arrangements and how the debt interacts with existing facilities.
If you are buying a commercial property, the lender may assess the property’s income as well as the business occupying it. If you are refinancing, the purpose of the refinance should be clear. If you are buying a business, the target’s cash flow, goodwill and security position need careful attention.
Where an acquisition finance deposit is limited, another property may potentially be used as security, subject to lender policy and a full assessment of the risks. That can help bridge an equity gap, but it also places another asset at risk if the new debt cannot be serviced.
This is where specialist advice is valuable. The cheapest-looking structure is not always the most resilient one.
4. COMPARE LENDER APPETITE
The major banks remain important commercial lenders, but they are not the only option.
Different lenders may have different views on:
- Property types and locations
- Loan sizes
- Industry sectors
- Low-document or complex applications
- Interest-only periods
- Valuation requirements
- Debt service coverage
- Borrower experience
- Business performance trends
A non-bank or specialist commercial lender may provide greater flexibility in some circumstances. The trade-off may be a higher interest rate, additional fees, shorter terms or more frequent reviews.
The right comparison is not “Which lender has the lowest rate?” It is “Which lender understands this risk, offers a workable structure and can remain suitable if conditions change?”
5. STRESS-TEST THE PLAN
Do not build a commercial loan around perfect conditions. Perfect conditions are usually busy doing something else.
Test the loan against higher interest rates, lower rent, a period of vacancy, slower business revenue and unexpected capital expenditure. Consider what happens if a major customer leaves, a tenant does not renew or a valuation comes in below expectations.
Review your cash buffer and repayment capacity. A working capital facility may help manage timing gaps, but it should not be used to disguise a permanently unprofitable business.
Stress-testing is not pessimism. It is how you protect your long-term goals from short-term surprises.
RISKS AND TRANSPARENCY: COMMERCIAL IS NOT A FREE PASS
Commercial lending may remain active, but banks can still tighten their commercial credit policies.
Lenders may increase serviceability buffers, reduce acceptable loan-to-value ratios, request more equity or scrutinise sectors they view as cyclical. Lender-ordered valuations may also come in softer than expected, particularly where comparable sales are limited or rental assumptions are aggressive.
Interest rates are another important trade-off. A lender outside the major banks may offer speed or flexibility, but potentially at a higher cost. Fees, valuation charges, legal costs, establishment fees and break costs can materially affect the overall outcome.
Commercial property also carries vacancy, tenant, maintenance and liquidity risks. Selling a specialised asset is not like selling a standard residential property, and a vacant building can quickly turn from an investment into a monthly expense.
Most importantly, do not over-leverage simply because a lender is prepared to offer the money. Borrowing capacity is not the same as borrowing wisdom.
Normal lending criteria apply. Terms, conditions, fees and charges may apply, and rates can change. This article is general information only and should not replace tailored legal, tax, accounting or financial advice.
TERMS TO KNOW
- SECOND-WAVE SHOCK: A delayed economic effect that becomes more visible after an initial policy or market change. In this case, the full impact of budget changes on housing demand may take time to emerge.
- SERVICEABILITY: A lender’s assessment of whether a borrower can meet loan repayments after considering income, expenses, existing debts and an interest-rate buffer.
- LENDER APPETITE: The types of borrowers, properties, industries and loan structures a lender is currently willing to consider.
- NON-BANK LENDER: A lender that provides finance but is not a traditional authorised deposit-taking bank. Non-bank lenders may offer flexibility, although pricing and conditions can differ.
- FRONT-LOADING: Preparing key documents and information before an application is submitted, reducing delays and giving the lender a clearer picture from the outset.
THE BASELINE DIFFERENCE
A changing credit market rewards preparation, not panic.
Baseline Finance provides jargon-free commercial finance guidance for Perth business owners, investors and ambitious entrepreneurs. We compare lender appetite, manage the paperwork and negotiate with lenders so you have one clear point of contact from strategy through to settlement.
Our Strategic Funding Plan provides a structured, benchmarked roadmap built around your goals, risk appetite and long-term business fundamentals.
CONTACT BASELINE FINANCE
Phone: 08 6108 3925
Email: commercial@baselinefin.com.au
For guidance on commercial property loans, refinancing, business lending or your next strategic funding move, speak with Baseline Finance before you apply.
