Is the Jobs Market Weakening Fast Enough to Stop Another Rate Rise?
The unemployment rate rose to 4.7% in September from 4.6% in August and 4.5% in July, with more than 39,000 people losing jobs and the participation rate falling to 66.8% Australian Broker. Victoria recorded the highest rate at 5.1%, followed by Tasmania at 5.0% and New South Wales at 4.7%, while South Australia and Western Australia sat lowest at 4.2%.
Economists are split on what it means for the 3 November decision. ANZ’s Jasmine Zheng still expects a rise in November but said rising unemployment makes another increase this year “less likely,” while CBA expects a hold and describes a rise as plausible. Governor Michele Bullock said after the September decision: “I don’t like the idea of job losses.”
What Did the Minutes of the September Rate Rise Reveal?
Minutes from the 29 September meeting, released on Tuesday, showed the Board’s strategy is to return inflation to target “in a timely manner, while preserving as many of the gains in employment as possible” Australian Broker. Members also noted that persistent adverse supply shocks “would require accepting slower growth in demand and employment.” CBA’s Belinda Allen called the minutes “decidedly hawkish,” in contrast with the Governor’s press conference, while noting CBA still sees the cash rate on hold “with November very much live.”
Westpac moved the other way this week, forecasting a rise to 4.85% in November and a hold at that level until mid-2027 Australian Broker. Westpac expects national home prices to fall about 8% in calendar 2026, with a peak-to-trough decline of just over 10%. Head of Australian macro-forecasting Matthew Hassan said the risk “is crystallising with turnover already down 20% and prices off 8%.”
How Far Has Mortgage Demand Fallen?
Equifax data showed mortgage demand fell 19.2% year on year in September, the sixth straight monthly decline and the weakest result since October 2022 Australian Broker. First home buyer applications fell 22.1%, the largest annual decline since December 2022, even as the average first home buyer loan reached a record $743,000. Equifax’s Kevin James said “Australian households are taking a decisive step back.”
Refinancing has slowed sharply too. Refinancing with an existing lender fell 28% and switching to a new lender fell 8.8%, and James said strict serviceability assessments are “effectively locking them into their current arrangements.” Cotality estimates the four rate rises since February have cut a median-income household’s borrowing capacity by almost $90,000, or about 9% Australian Broker.
What can borrowers do if they cannot pass serviceability to refinance?
Asking the current lender to reprice the loan does not usually require a new serviceability test, so it is often the first option. Some lenders also approve refinances as exceptions to their standard serviceability rules when the new loan lowers repayments and the borrower has a good repayment history. Lender policy on these exceptions varies widely, which is where comparing lenders through a broker can help with refinancing.
What Did ASIC Find in Its Review of Mortgage Brokers?
ASIC’s review of the best interests duty, covering 13 credit licensees across eight aggregator groups, found broker practices were “broadly in line with its guidance” but identified room for improvement Australian Broker. Seven of the eight groups reported that brokers did not recommend the cheapest available option in more than one in five cases. ASIC accepted there can be valid reasons, such as features that suit the borrower better, but said “the greater the cost difference, the stronger the evidence needed.”
The review found no apparent steering toward lenders paying higher commissions, though it flagged delays in handling complaints. Brokers now arrange 81.6% of new home loans, according to MFAA figures. For borrowers, the practical takeaway is that a broker should be able to explain clearly why a recommended loan suits their needs, particularly when it is not the lowest rate available.
How Are Auctions and Agents Reading the Market?
Unsold auctions outnumbered sales last weekend, with the preliminary combined clearance rate at 48.8% from 1,208 results Australian Broker. Brisbane cleared just 21.4%, matching its weakest preliminary result since May 2020, while Sydney fell to a 10-week low of 52.9% and Melbourne recorded 54.8%. It was the first full weekend after the major banks’ higher variable rates took effect.
NAB’s Residential Property Index fell 18 points to -4 in the September quarter, the first negative reading in six years, and surveyed property professionals now expect national house prices to fall 4.2% over the next 12 months. Interest rates replaced price levels as the biggest constraint for buyers of established homes, followed by access to credit.
Key Takeaways
- •Unemployment rose to 4.7% in September, a five-year high, with Victoria highest at 5.1%.
- •RBA minutes said the trade-off between inflation and employment had deteriorated, and economists are split on a November rise.
- •Westpac expects a rise to 4.85% in November and a peak-to-trough fall in home prices of just over 10%.
- •Mortgage demand fell 19.2% in September, and Cotality estimates four rate rises cut median borrowing capacity by almost $90,000.
- •ASIC found broker practices broadly in line with its best interests guidance, with stronger evidence expected when a higher-cost loan is recommended.
- •Brisbane’s preliminary clearance rate fell to 21.4%, and NAB’s property index turned negative for the first time in six years.