Why Did the RBA Raise Rates to 4.60%?
The Monetary Policy Board’s unanimous decision on 29 September lifted the cash rate target from 4.35% to 4.60%, with the Board stating that “inflation remains elevated and some of the upside risks flagged in August are materialising” RBA. The Board said it would raise rates further if needed to return inflation to target in a timely way.
The case was reinforced a day later. Monthly CPI rose 4.0% in the 12 months to August, up from 3.5% in July, with housing costs up 5.7% and new dwelling prices up 5.4%, while the trimmed mean held at 3.6% ABS. Both measures remain well above the RBA’s 2% to 3% target band.
When Will the Big Four Banks Pass On the Rate Rise?
CBA, NAB, Westpac and ANZ all announced on 30 September that variable home loan rates would rise by 0.25 percentage points from Friday 9 October Australian Broker. The change ends sub-6% variable pricing at the majors. Westpac’s lowest variable rate moves from 5.99% to 6.24%, NAB’s from 6.29%, CBA’s to 6.34% and ANZ’s to 6.50%. Many other lenders confirmed their own increases within days, with effective dates ranging from 2 October to mid-October.
On a $750,000 principal and interest loan, the rise adds roughly $115 to $120 a month once passed on in full, depending on the remaining term. Lenders must give written notice before repayments change, so many borrowers will not see the higher amount for several weeks. That lag is a practical window: a request to reprice, or a comparison of what other lenders offer new customers, can offset some or all of the increase before it lands.
How Far Have Home Values Fallen Now?
Cotality’s Home Value Index fell 1.1% in September, the sixth monthly decline in a row, leaving national values 5.2% below their March peak Cotality. Brisbane recorded the sharpest fall of the capitals at 1.5%, Sydney fell 1.4% and is now 8.6% below its February peak, and 97% of capital city suburbs lost value over the three months to September.
Rents are still rising, up 5.5% over the year, which has pushed the national gross rental yield to 3.85%, the highest since August 2019. Homes are taking longer to sell, with a median of 39 days in the capitals compared with 23 a year ago.
Is Refinancing Getting Harder?
An MFAA survey found 49.2% of brokers now see clients unable to refinance because they cannot pass serviceability, more than double the share six months earlier, and broker associations urged borrowers to review their loans early The Adviser. Separate analysis from Aussie found 20.7% of borrowers who bought between July 2023 and August 2025 now sit above 80% loan-to-value ratio, rising to 51.6% in Victoria The Adviser.
Those two pressures, higher assessment rates and lower valuations, are the main reasons some borrowers feel stuck with their current lender. Repricing with the existing lender avoids both a new serviceability test and a new valuation, and some lenders also accept refinancing applications as exceptions to their standard serviceability test when the new loan lowers repayments.
What did the RBA’s Financial Stability Review say about mortgage holders?
The October review found most mortgage holders “remain well placed” even if prices fall sharply, with pockets of stress RBA. Fewer than 2% of variable rate owner-occupiers have a cash flow shortfall, and the RBA estimated a 20% fall in prices would leave about 5% of mortgages in negative equity. Banks were assessed as well positioned to keep lending.
Which Lender Changes Matter This Week?
A Queensland-based bank being absorbed into its parent bank will stop accepting new home loan applications from 7 October, with approvals closing on 27 October and settlements required by 26 December Broker Daily. Existing loans continue as normal, but customers planning a top-up, a new split or a variation that needs credit approval may need to arrange it before the cut-off or through another lender.
Elsewhere, Teachers Mutual Bank opened the government’s Help to Buy shared equity scheme to its first group of trained brokers from 6 October, allowing eligible buyers to purchase with a 2% deposit while the government takes an equity share of up to 30% for existing homes or 40% for new homes Australian Broker. Forty-year home loan terms are also spreading, with a non-bank lender launching one this week to join AMP, Great Southern Bank, RACQ, Pepper, Liberty and MA Money Australian Broker. A longer term lowers repayments but adds substantially to the total interest paid over the life of the loan.
Key Takeaways
- •The RBA lifted the cash rate to 4.60% on 29 September, its fourth rise of 2026 and the highest level since 2011.
- •All four major banks pass the rise on in full from 9 October, ending sub-6% variable rates at the big four.
- •Annual inflation rose to 4.0% in August, with housing costs up 5.7%.
- •National home values fell 1.1% in September and are now 5.2% below their March peak.
- •49.2% of brokers report clients unable to refinance on serviceability, and 20.7% of recent buyers now sit above 80% LVR.
- •A Queensland-based bank stops taking new home loan applications on 7 October as it moves into its parent bank.