Broker Notes #25: RBA Warns Inflation Is Materially Worse as House Prices Fall in Every Capital

Will the RBA Raise Rates Again in November?

Speaking at the Citi Australia & New Zealand Investment Conference in Sydney, Hauser said “monetary policy is working,” pointing to an easing labour market and tepid consumption, but added that “the inflation outlook has deteriorated” [Australian Broker]. He framed the Board’s choice as doing more to tackle inflation at the cost of weaker activity, or holding to protect jobs and accepting the risk that high inflation becomes embedded. Headline CPI was 4.0% in the year to August, and trimmed mean inflation has sat at 3.6% for three straight months, both above the RBA’s 2% to 3% target band.

The comments shifted broker expectations quickly. Several brokers surveyed by Australian Broker now expect a rise, while others still see a hold as the base case [Australian Broker]. Compare the Market’s David Koch said the call “remains finely balanced,” with the September quarter CPI, due before the meeting, likely to be decisive. Rateseeker’s Nick Chong estimated that every 0.25 percentage point rise trims borrowing capacity by roughly $15,000 to $30,000, with recent buyers and first home buyers feeling it first.

Nobody can reliably call the next move, and the RBA itself has said it is weighing a genuine trade-off. Borrowers who prioritise certainty sometimes look at fixing part of their loan, though one broker told Australian Broker that fixed rates have already risen about 0.35 percentage points across the board, which narrows the gap. The structure of the loan, including offset balances, splits and buffers, tends to matter more over time than any single decision.

Why Are House Prices Falling in Every Capital City?

The combined capitals median house price fell 4.7%, or $59,870, over the September quarter, which Domain described as the steepest quarterly decline it has recorded [Australian Broker]. All eight capitals fell at once for only the second time on record. Domain’s Nicola Powell said the weakness, first concentrated in Sydney and Melbourne, “has broadened geographically, and it has deepened.”

The cities that led the last upswing fell hardest. Perth’s median dropped 7.4% ($88,664) to $1.115 million, and Brisbane fell 5.4% to $1.15 million, ending a 14-quarter run of growth. Sydney slipped 4.7% to $1.66 million, its third consecutive quarterly fall. AMP’s Diana Mousina called the downturn “a recalibration of the market” and noted that price falls have featured in every rate-rise cycle she can recall.

Falling values matter for existing owners as well as buyers. A lower valuation lifts a borrower’s loan-to-value ratio (the loan as a share of the property’s value), which can affect the rate a lender offers and whether a refinance needs lenders mortgage insurance. For long-term investors, a softer market also changes the negotiating position on purchases, which is the part of the cycle that rarely makes the headlines.

Why Can’t Some Borrowers Refinance When Rates Rise?

Refinancing made up a record 57% of Loan Market Group’s mortgage lodgements in the last two weeks of September, as borrowers looked for sharper rates [Australian Broker]. That churn sits alongside a harder reality. The MFAA’s August survey found 49.2% of brokers had more clients unable to refinance because of serviceability, more than double the 24.4% recorded six months earlier, and Equifax data shows switching to a new lender fell 8.8% year on year in September.

Brokers interviewed this week described borrowers who borrowed when rates were about two points lower, or whose income has changed through redundancy, now failing the new lender’s assessment even with large equity [Australian Broker]. Some are using lenders that assess like-for-like refinances with a 1% serviceability buffer instead of the standard 3%. Retention teams at existing lenders are also offering bigger discounts and waived fees to keep customers.

How Far Has Investor Lending Fallen Since the Budget?

Investor lodgements are down 45% by value since the end of January and 23% since the end of June, according to Loan Market Group’s October market report. Investor demand for established homes, which lose negative gearing for purchases made after the May 2026 Budget, has dropped 56%, compared with a 10% fall for new homes, which keep the concession. Once refinancing is stripped out, the value of new lodgements is 24% lower than at the end of January.

The slowdown is sharpest in Queensland, where new lodgements are down 30%, followed by New South Wales at 29% and South Australia at 26%. For investors, the split between new and established stock now shapes both the after-tax return and how some lenders assess rental losses in servicing. Tax treatment depends on individual circumstances, so a qualified tax adviser is best placed to assess how the changes apply to a specific purchase, while loan structure is where investment loans planning starts.

Is Mortgage Stress Rising Across Australia?

The number of home loans showing signs of repayment strain grew 7.3% in the first half of 2026, more than three times the 2.3% rise over the same period last year, according to Experian’s Housing Pressure Report [Australian Broker]. Experian counts loans in arrears, under hardship arrangements or with variations, and 1.8% of home loan accounts met that test in June. Borrowers aged 35 to 44 recorded the fastest growth in strain, up 11.8%, and regional loans were about 10.5% more likely than average to be under pressure.

The survey side of the report shows thin buffers. 42.4% of respondents were not confident they could absorb a 10% increase in repayments without cutting essentials or borrowing more, and 20.9% regularly or sometimes draw on savings or credit to get through a typical month. Over the past year, 18.5% said they had delayed plans to buy a home.

Why Are Home Loan Complaints Rising?

Home loan complaints to the Australian Financial Complaints Authority rose 21% in 2025–26, from 5,818 to 7,014, as total complaints hit a record 119,949 [Australian Broker]. Complaints from customers in financial difficulty rose 17%, and home loans were the product most often involved. The most common hardship issue was a financial firm failing to respond to a request at all, raised in 3,076 complaints.

AFCA’s chief ombudsman David Locke said “nobody should be comfortable with complaint volumes at the levels we are now seeing.” Lenders have obligations to respond to hardship requests under the National Credit Code, and borrowers who have not received a response can escalate through the lender’s internal dispute process and then to AFCA. AFCA also ruled this year that a business loan arranged to clear home loan arrears was covered by consumer credit law, noting that “the true purpose of a loan, rather than simply how it is documented,” determines which protections apply.