Broker Notes – 20 June 2026

RBA Holds Cash Rate at 4.35% After Three Consecutive Hikes

The Reserve Bank of Australia’s Monetary Policy Board announced on 16 June that the official cash rate would remain at 4.35%, pausing the current tightening cycle after hikes in February, March, and May 2026. Financial markets had priced a 100% probability of a hold, and all four major bank economists had publicly backed that call ahead of the meeting.

The board’s post-meeting statement signalled that the pause was not a signal that tightening was finished. The board said it remained “focused on ensuring that inflation does not become embedded” and flagged it was “assessing the response to previous interest rate rises,” while also keeping a close eye on the ongoing impact of an oil supply disruption. Trimmed mean inflation, the RBA’s preferred gauge, edged up from 3.3 to 3.4% in April, well above the 2-3% target band. GDP grew just 0.3% in the March quarter, and unemployment lifted from 4.3 to 4.5% in April, giving the board reason to wait rather than move again immediately.

Industry response was broadly positive but measured. MFAA CEO Anja Pannek described the hold as “an opportunity for borrowers to assess their financial position and consider whether their current loan remains competitive,” noting that competition among lenders remains strong even without a rate cut. FBAA CEO Peter White flagged that many existing borrowers may be victims of “rate creep,” where lenders charge higher rates to existing customers while discounting for new ones.

Big Four Banks Are Now Split on When Rates Will Fall

The June hold has not produced agreement among the majors on what comes next. All four banks predicted Tuesday’s pause correctly, but their forecasts for the months ahead diverge sharply, covering scenarios from further hikes to cuts starting as early as the second quarter of 2027.

CBA head of Australian economics Belinda Allen described the June meeting as “closely balanced between stubborn inflation and a cooling economy,” and said the tone from governor Michele Bullock was deliberately hawkish on the inflation side. CBA’s base case is an extended hold through 2026, with two rate cuts in May and August 2027. ANZ chief economist Adam Boyton reached a similar conclusion, saying that “rate cuts are likely to be the next sequence of rate moves” and pencilling them in for August and November 2027. Both banks see the current 4.35% as the cycle peak, absent a fresh inflation surprise.

NAB made its own position clearer on 9 June, abandoning its previous call for a further 25-basis-point hike in August. It now expects 4.35% to be the ceiling of this tightening cycle and has brought forward its first expected cut to Q2 2027, with the cash rate ending 2027 at 3.6%.

Westpac is the clear outlier. Chief economist Luci Ellis argued this week that the RBA “explicitly signalled that further hikes remain on the table” with its June statement, describing the language choice as “unusual for an RBA statement” and a deliberate attempt to “hose down recent speculation that they are done hiking rates.” Westpac retains its call for hikes at the August and September meetings, contingent on June quarter inflation coming in strong.

Income Hurdles Jump by Up to $17,000 as Rate Hikes Cancel Out Cheaper Prices

New analysis from Cotality’s May Housing Chart Pack shows that three cash rate hikes this year have reversed any affordability benefit that came from softening prices in Sydney and Melbourne, and pushed income requirements sharply higher in mid-tier capitals where values are still rising. The report, published 18 June, puts specific dollar figures on a squeeze that many buyers already feel but struggle to articulate.

In Brisbane, the minimum household income required to service a mortgage on a lower-quartile house has jumped by $14,500 since January 2026. Perth buyers face a near-identical increase of around $14,500 on lower-quartile houses, and buyers targeting a median house in Brisbane now need more than $17,000 in additional annual income compared with January to qualify for a standard loan. Cotality head of research Gerard Burg said this was the direct result of higher rates feeding through to serviceability tests “at the same time as dwelling values continue to edge higher in the mid-tier capitals.”

In Sydney and Melbourne, prices have softened, but the relief is illusory. Sydney dwelling values fell 0.9% in May and 2.1% over the quarter. Melbourne dropped 0.8% over the month and 2.3% over the quarter. Yet Cotality found that higher rates had “intensified mortgage serviceability constraints nationwide,” completely offsetting those price declines. Sydney buyers now need $70,000 more in annual household income than Melbourne buyers to qualify for a median house, a gap that reflects both the cities’ price difference and the magnifying effect of higher rates on already stretched serviceability calculations.

Meanwhile, Brisbane and Perth continued to record value gains. Brisbane rose 0.9% in May and 3.4% over the quarter. Perth lifted 1.5% in May and 4.8% over the quarter. Adelaide gained 0.5% in May and 2.8% over the quarter. Cotality flagged that buyers priced out of houses are pivoting to apartments in large numbers, creating intense competition for Brisbane units to the point where the income gap between buying a median unit in Brisbane versus Sydney has narrowed to just over $2,000. First home buyers accounted for 29% of owner-occupier lending nationally, slightly above the decade average of 27.6%, though Cotality also noted a “subtle rise” in higher-risk loan originations over recent quarters.

640,000 Households Refinancing Annually as Bank Competition Drives Record Lending

A new Australian Banking Association report published this week reveals that banks are writing record volumes of loans across housing and business, and that refinancing activity is running at a pace that could be saving the average borrower up to $2,000 per year in mortgage interest. The report, titled “How Australian banks power the economy,” provides a comprehensive snapshot of credit flows into the Australian economy.

The ABA said more than 640,000 households are refinancing their mortgages each year as borrowers respond to pricing signals and promotional offers. ABA CEO Simon Birmingham said that reduced switching friction was the key driver: “Barriers to changing banks have come down, while competition has gone up, with evidence showing that switching can save the average household up to $2,000 a year in mortgage interest payments.”

The data also points to strong first home buyer activity. More than 670,000 first home buyers have taken out loans with banks over the past five years, and construction lending in the last financial year helped deliver around 110,000 new dwellings. Banks wrote $49 billion in loans in FY2025 aimed specifically at increasing the stock of new homes, while approximately 65% of all property settlements, roughly 445,000 transactions, involved a bank loan over the same period. Around 65% of Australian banks are owned by Australian households either directly through share portfolios or via superannuation, with those holdings valued at approximately $470 billion, up from $240 billion in 2010.

The refinancing data is particularly relevant for existing borrowers who have not reviewed their loan since rates started moving in early 2026. The FBAA’s Peter White noted this week that many borrowers are unknowing victims of “rate creep,” where lenders raise rates for existing customers while offering discounts to attract new ones. An existing borrower who approaches their lender directly, or who works through a broker to compare the market, may find a more competitive outcome than the one they currently have.