Westpac has dropped its forecast for two more Reserve Bank rate hikes this year after June quarter inflation came in softer than expected, headline CPI at 3.8% and the RBA’s preferred trimmed mean measure steady at 3.6%. It’s a genuine reversal: Westpac was the last major bank still tipping an August rise. Yet four days earlier, RBA Governor Michele Bullock told a Sydney audience the board still faces “difficult decisions” if inflation doesn’t keep cooling, and hasn’t ruled out lifting the cash rate further. For anyone with a variable loan or a fixed rate expiring around the RBA’s 11 August meeting, the outlook just became less settled, not more.
Westpac Drops Its Rate-Hike Call, But the RBA Isn’t Ruling One Out
The Australian Bureau of Statistics’ June quarter figures showed headline CPI easing to 3.8% in the 12 months to June, down from 4.0% in May and below both market expectations and the RBA’s own forecast. Housing costs remained the biggest contributor, up 6.8%, followed by food and non-alcoholic beverages and recreation and culture, both up 3.3%. On a monthly basis, CPI actually edged down 0.1% in June. Trimmed mean inflation, the measure the RBA watches most closely, held at 3.6% over the year, unchanged from May and still above the central bank’s 2% to 3% target band The Adviser.
Westpac’s response was the sharpest shift among the majors. Having pencilled in hikes for both August and September, chief economist Luci Ellis said the bank “no longer expect[s] rate hikes by the RBA this year,” pointing to weaker-than-feared pass-through from earlier energy price shocks. Westpac still flags a risk of a November hike if inflation reaccelerates in the September quarter, but it’s no longer the bank’s base case. CBA, NAB and ANZ all held their view that the cash rate stays at 4.35% through the rest of 2026, with ANZ noting the trajectory of underlying inflation “does suggest that there remains the risk of a rate hike in November” even as an August move looks unlikely.
Governor Bullock struck a more cautious note than the market reaction suggested was warranted. Addressing the Anika Foundation on 28 July, she said the board “[is] prepared to act as required to achieve its mandate, including by increasing the cash rate further if needed,” adding that “if it looks like inflation is not coming down, then I think the board have some difficult decisions to make in terms of raising interest rates.” She also said the RBA still expects “some further easing in labour market conditions” will be needed to bring inflation back to target The Adviser.
Because they’re weighing the same data differently. CBA, NAB and ANZ read the softer CPI print and a steady unemployment rate as reasons to expect a hold at the RBA’s 11 August meeting. Westpac reached the same near-term view but had been the outlier calling for hikes into September, and has now walked that back. The RBA’s own governor has flagged that further tightening is still possible if inflation doesn’t keep easing. When forecasts diverge like this, the incoming data, including the September quarter CPI, usually ends up mattering more than any single bank’s current call. Borrowers weighing whether to fix, split, or stay variable are often better placed working through the trade-offs with a broker than betting on one forecast over another.
The SMSF Property Borrowing Ban Is Now Nine Days Away
The Australian Taxation Office released detailed guidance on 30 July confirming exactly how the incoming ban on new residential borrowing arrangements inside self-managed super funds will work. From 10 August, a fund can only use a Limited Recourse Borrowing Arrangement (LRBA) to buy real property that meets the definition of business real property, both at the time the arrangement is entered into and for its entire term. Standard residential investment property that doesn’t meet that test can still be bought by an SMSF, just not financed through an LRBA The Adviser.
SMSF Association chief executive Peter Burgess welcomed the guidance but flagged where it still leaves trustees exposed. The ATO has confirmed that transitional relief turns on exchanging a binding contract before 10 August, a clear line, but one that Burgess says “may come at a cost for some trustees who have already undertaken substantial steps towards a transaction and incurred significant costs but are not yet in a position to exchange contracts.” Off-the-plan purchases can still qualify for relief where contracts are exchanged before the deadline even if finance and settlement occur later, though the ATO hasn’t yet clarified how it will treat contract variations made after exchange.
Lenders are moving on their own timelines ahead of the cut-off. One major bank will stop accepting new SMSF pre-approvals from 5pm on 3 August, requiring contracts to be exchanged by 9 August for existing arrangements to proceed. A non-bank lender has already stopped accepting new residential SMSF approvals in principle from the close of business on 31 July, though applications backed by a contract dated on or before 9 August can still be lodged after that date. Another non-bank has taken a different approach, launching a streamlined SMSF refinance pathway that assesses eligible applications on demonstrated repayment history rather than a full serviceability test Broker Daily.
Because the exact exchange date determines whether a purchase falls under the old rules or the new ones, and because SMSF lending sits across super, tax and lending rules at once, anyone with a fund purchase in progress is best placed confirming their contract and settlement timeline with their accountant or SMSF adviser alongside their broker, rather than assuming the current arrangement will carry through automatically.
Lenders Keep Cutting Rates and Loosening Policy Despite the Cash Rate Hold
Rate competition hasn’t slowed just because the cash rate has. A major bank trimmed its one- and two-year owner-occupier fixed rates by up to 20 basis points, taking its two-year fixed rate to 6.34%, just above the lowest major bank fixed rate currently on offer at 6.29% for two years The Adviser. A non-bank lender cut a range of fixed rates by up to 40 basis points and trimmed variable rates too, while another lender reduced fixed rates by 10 to 20 basis points across one- and two-year owner-occupier terms. In total, 21 lenders have reduced at least one fixed rate since 1 June, though 11 lenders have lifted selected fixed rates over the same period, a sign pricing is moving in both directions depending on each lender’s funding costs and appetite for new business.
Policy is loosening alongside price. One non-bank lender lifted its maximum loan-to-value ratio to 98% (including the lender protection fee) across all property categories, including high-density units, and tripled its maximum loan size at that LVR to $3 million. A major bank launched a new investment loan offering terms of up to 40 years with up to 10 years of interest-only repayments for eligible borrowers. A mutual bank expanded its lenders mortgage insurance waiver to eligible healthcare and education workers, letting them borrow up to 90% LVR on an owner-occupied purchase without paying an LMI premium Broker Daily.
For borrowers comparing offers, the combination matters as much as any single change. A lower headline rate tells only part of the story when maximum LVR, loan size caps and interest-only terms are moving at the same time, and the product that looks cheapest on rate alone isn’t always the one that best fits a specific borrowing scenario.
Vendors Are Retreating From Auctions as the Property Market Cools Faster Than Expected
Bullock’s own speech flagged this shift before the data confirmed it. “We had expected conditions to ease in response to the changed outlook for monetary policy and the rise in the cash rate earlier this year,” she said. “But the housing market has eased by more than we had anticipated.” Cotality’s July chart pack shows what that looks like in practice: the national share of auctions to new listings has dropped from a peak of almost 45% in November 2025 to just over 30% in June 2026, as more vendors opt for private treaty sales instead of testing the auction room Cotality.
Prices are following the same path. Sydney dwelling values fell 1.2% in June and now sit 3.7% below their January 2026 peak, while Melbourne values fell 1.0% over the month and are 4.0% below their March 2022 high. Vendor discounting, the gap between a property’s original asking price and its eventual sale price, has risen to a median 3.6% across the combined capitals, the clearest sign yet that negotiating leverage has shifted toward buyers in the cities where values have fallen hardest.
Listings tell a similar story of a market with more choice than a year ago, even if stock overall remains tight by historical standards. New listings totalled 33,935 over the four weeks to 5 July, still 6.2% below the five-year average, but total stock on market reached 131,407, up 7.7% on the same time last year. For buyers who felt priced out of the fiercest competition earlier in the cycle, a softer auction market and rising vendor discounts represent a genuinely different negotiating position than twelve months ago, even where headline prices in a given suburb haven’t moved much yet.
HSBC Is Exiting Australian Retail Banking in a $36 Billion Deal
HSBC has entered a binding agreement to sell its entire $36 billion Australian home and personal loan portfolio to US asset manager Blackstone, in a deal Blackstone describes as the largest home loan portfolio transaction completed globally. The sale is expected to complete in the first half of 2027, subject to regulatory approval Broker Daily.
Pepper Money will service the portfolio once the sale completes, continuing to support existing customers and the brokers who originally wrote their loans, while the rest of HSBC Australia’s retail banking business winds down over the following 18 months. HSBC says existing customers can continue banking as normal for now and no action is required at this stage, with more detail on any product changes to follow. The bank’s institutional, private banking and asset management businesses in Australia are unaffected and will keep operating locally.
For brokers and customers with an HSBC home loan, the practical impact is likely to unfold gradually rather than all at once, but it’s a reminder that a lender’s ownership and servicing arrangements can change well after settlement. Anyone with an HSBC mortgage wanting to understand what the transition means for their specific loan is best placed raising it directly with their broker as further detail becomes available.
Key Takeaways
- Westpac has dropped its forecast for two more RBA rate hikes after June quarter CPI eased to 3.8% (trimmed mean steady at 3.6%), but Governor Michele Bullock says the board still faces “difficult decisions” and hasn’t ruled out a further rise.
- CBA, NAB and ANZ all expect the RBA to hold at 4.35% at its 11 August meeting; Westpac’s hike call, previously the outlier among the majors, has now been withdrawn rather than confirmed.
- New residential SMSF property loans need a binding contract exchanged before 10 August to qualify for transitional relief under the incoming LRBA ban, and several lenders have already set their own earlier cut-off dates for pre-approvals.
- A major bank trimmed its two-year fixed rate to 6.34% while a non-bank lender lifted its maximum LVR to 98% and another launched a 40-year investment loan, showing lenders competing on policy as much as price.
- Cotality data shows the national auction share has fallen from near 45% to just over 30% since November, with vendor discounting rising to a median 3.6% as Sydney and Melbourne values keep easing.
- HSBC is exiting Australian retail banking, selling its $36 billion loan portfolio to Blackstone with Pepper Money set to service the book once the deal completes in the first half of 2027.