Broker Notes #16: Jobless Rate Rises as Non-Banks Win a Growing Share of Home Loans

Is the Jobs Market Cooling Enough to Keep the RBA on Hold?

The unemployment rate rose to 4.5% in July from 4.4% in June, with 15,800 fewer people employed and the participation rate easing to 66.9% Australian Broker. Victoria and Tasmania recorded the highest state unemployment at 5.1%, while South Australia sat lowest at 4.1%. CBA economist Harry Ottley described the labour market as one that “remains on a solid footing, but is slowly loosening”, and his team now expects the cash rate to stay at 4.35% for the rest of 2026.

Wage figures released a day earlier pointed the same way. The Wage Price Index rose 0.8% in the June quarter and 3.2% over the year, down from 3.4% a year earlier, with private sector wages up 3.1% and public sector wages up 3.4% ABS. The share of jobs receiving a pay rise of 4% or more has shrunk, which takes some heat out of the wage side of the inflation story.

The Reserve Bank is not ready to call the hiking cycle over. Speaking in Brisbane on Wednesday, Deputy Governor Andrew Hauser named the Middle East conflict, the investment boom in artificial intelligence and weak productivity growth as upside risks, adding: “If those upside risks to inflation crystallise and we don’t see inflation coming down, we will.” Headline inflation was 3.8% in the year to June and the trimmed mean held at 3.6%, both still above the 2% to 3% target band.

For variable rate borrowers, the practical read is a hold that comes with conditions attached. Anyone weighing a fixed rate is effectively pricing that uncertainty, since fixed rates are priced on where markets expect the cash rate to go over the term.

Why Are Non-Bank Lenders Winning a Bigger Share of Home Loans?

Non-bank lenders issued $10.49 billion in new home loans in the June quarter, up from $6.35 billion a year earlier, according to Money.com.au analysis of ABS lending figures Australian Broker. Banks and other deposit-taking lenders grew just 2.6% over the same period, from $85.41 billion to $87.61 billion. Non-banks now account for 10.7% of new home lending by value, more than double their 4.8% share in September 2019.

The timing stands out. Non-bank lending rose 3.2% over the quarter while total new housing lending fell 5.2%, so this growth came during a slowdown. One structural reason is the serviceability buffer. Banks regulated by APRA assess borrowers at their loan rate plus at least 3 percentage points, while non-banks sit outside that rule and set their own buffers, which are often lower. For some borrowers that translates into a higher assessed borrowing capacity.

Non-banks tend to suit borrowers whose files do not fit neatly into bank policy, including self-employed applicants and people with credit issues, while some remain competitive on rate for straightforward borrowers too. With investor lending tighter after the May budget, the gap between what a bank will approve and what a non-bank will approve has widened, and comparing both is now a routine part of finding the right fit.

How Tight Is the Rental Market Heading Into Spring?

SQM Research’s national rental vacancy rate held at 1.3% in July, with five capital cities below 1%: Brisbane, Perth, Adelaide, Darwin and Hobart Australian Broker. Darwin was the tightest market at 0.3%, while Sydney and Melbourne sat at 1.7% and Canberra at 1.8%. National combined rents rose 7.2% over the year to an average of $698.45 a week, and $796.51 a week across the capitals.

Rising rents have not closed the gap for investors. Cotality research cited in the same report found only 0.8% of Australian suburbs now deliver positive cash flow, even with prices falling. For anyone weighing an investment loan, the numbers still rely heavily on long-term capital growth, with rent covering only part of the repayments.

Where Are SMSF Investors Going After the Residential Borrowing Ban?

The ban on self-managed super funds entering new limited recourse borrowing arrangements for residential property took effect on 10 August, and early survey data shows where that money is heading Australian Broker. A Money.com.au survey found 26% of SMSF investors plan to shift toward commercial property inside their fund, while 12% plan to buy residential property outright with existing cash. Existing residential arrangements are grandfathered, and borrowing for commercial property through an SMSF remains permitted.

Commercial property brings different risks. Vacancy periods can run longer, lease terms carry more weight in the lender’s assessment, and holding costs such as council rates, insurance and maintenance need conservative buffers. Trustees considering SMSF lending for commercial property are working at the intersection of super, tax and lending rules, and a licensed financial adviser and accountant are best placed to assess whether a change in strategy suits the fund.

Are Borrowers Starting to Feel the Rate Rises?

The country’s largest lender reported in its full-year results that 85% of its home loan customers were ahead on repayments, down from 87% in December, while offset balances fell from $97 billion to $94 billion over the same period Australian Broker. Neither number signals distress on its own, but both show households drawing on the buffers they built up before this year’s rises.

Lender pricing is split. A handful of lenders lifted variable rates this week while others cut, and more banks are now offering at least one variable rate starting with a 5. Borrowers who have not reviewed their rate since the May hike may find a gap between what they pay and what new customers are being offered, and refinancing or a repricing request remains the most direct way to test it.