Australia’s banking giants have taken a hit after Westpac reported a sharp decline in home loan applications, raising fresh questions about the strength of the housing market and household demand.

The ASX 200 fell 0.3 per cent on Monday to 9,232 points, with the banking sector emerging as the biggest drag on the market.

Westpac shares dropped almost 6 per cent after the bank revealed that home loan applications had fallen 20 per cent since the federal budget. The weakness spread across the Big Four, with ANZ, NAB and Commonwealth Bank also recording declines.

The result came despite Westpac reporting a modest rise in quarterly profit. Investors instead focused on softer revenue growth, flat net interest margins and signs that mortgage demand is losing momentum.

The decline in lending activity is significant because Australia’s major banks are closely tied to the housing market. Fewer mortgage applications can signal weaker demand from prospective homebuyers and a more cautious household sector.

Elsewhere, the market offered some brighter spots.

Online automotive marketplace CAR Group  surged almost 10 per cent after reporting a 14 per cent rise in full-year net profit to $314 million and increasing its dividend. Mining stocks also performed strongly, with BHP and Rio Tinto gaining, while ResMed climbed after receiving broker upgrades.

Gold stocks were another area of strength as investors continued to watch the precious metal’s performance amid shifting expectations around interest rates and the US dollar.

The market’s attention now turns to the Reserve Bank of Australia’s latest interest-rate decision, alongside a busy week of corporate earnings from major companies including Commonwealth Bank and Telstra.

For investors, Westpac’s numbers offer more than a snapshot of one bank’s performance. They provide another signal of how households are responding to economic conditions and whether Australia’s powerful housing and banking sectors could be entering a more cautious phase.