Mortgage analysts and brokers are tipping a 25 to 40 per cent reduction in investor home loans, as the banks begin tightening lending in response to the federal budget.The end of negative gearing for existing investment properties and cuts to capital gains tax discounts appear to have already coloured auction activity in Australia’s most expensive market.Fewer than half of the homes up for auction in Sydney last week actually sold — the lowest figure since the beginning of the pandemic.Preliminary data from Cotality shows Sydney’s auction clearance rate fell from 55 per cent to 49 per cent last week, as investors and banks get their heads around the new federal tax changes.Macquarie and Westpac have become the first big banks to stop their mortgage brokers factoring in negative gearing.Jarden analyst Matt Wilson told Capital Brief a 25 per cent drop in new loans could result from the tax changes.Refinance.com.au broker Aidan Hartley predicts a 30 to 40 per cent dip in investor loans.“Banks are like dominoes. If one moves, they will all likely follow, which could have a huge effect on investor applications,” he told Capital Brief.With Westpac the first to move among the big four banks, ANC, Commonwealth and NAB say they are working through the federal tax policy implications.Figures from Ray White this week show average attendees at the realty giant’s open homes have dipped from 2.5 people per property to 2.1 last week — a considerable drop as well from 3.4 people at each property this time last year.From July 1, 2027, the 50 per cent capital gains tax discount will be replaced by a concession based on inflation and introduce a minimum 30 per cent tax on gains.The change will be paired with a stripping back of negative gearing, with the concession limited only to new builds. A property investor negatively gearing before May 12, 2026 can continue to do so.Read related topics:Westpac