Shares of Westpac Banking Corporation tumbled 5.05% during Monday's intraday trading session, as investors reacted to the lender's disclosure of a sharp drop in mortgage application volumes following recent government tax changes.

The sell-off was triggered by news that Westpac's average monthly mortgage application volumes fell 20% in the fiscal third quarter to 29,000, which the bank attributed to the impact of recent government tax changes. The decline in mortgage demand overshadowed the company's quarterly unaudited net profit of AUD1.8 billion, excluding notable items, which was down from AUD1.9 billion a year earlier.

Adding to concerns, Westpac said it expects housing credit growth to moderate from 6.8% in fiscal 2026 to 4.7% in fiscal 2027. While the bank noted that an undersupply of housing and population growth should partially offset the impact of higher interest rates and policy changes, traders focused on the near-term headwinds facing the mortgage market. The core net interest margin came in at 1.78%, while the CET1 capital ratio stood at 12.1%.