Broker expertise essential as Monetary Policy Board surprises no one with September hold
Today’s decision by the Reserve Bank of Australia (RBA) to hold interest rates at 3.6% came as no surprise, but as always, the devil was in the details of the subsequent press conference.
The Monetary Policy Board parroted the well-worn “outlook remains uncertain” narrative, highlighting that private demand is recovering “a little more rapidly than expected”, taking over from public demand as the driver of growth.
The housing market is strengthening, suggesting that recent interest rate decreases are doing their job. In other words, if it ain’t broke, don’t fix it.
US tariffs are also keeping Board members on edge, as are stronger-than-expected data on growth and inflation at home.
Shane Oliver, chief economist at AMP Bank, believes there is still an “easing bias” among the Board, although this bias has been “substantially watered down” since August.
“It’s no surprise that the RBA Board unanimously decided to leave rates on hold and ‘remain cautious’ dependent on how the data evolves,” said Oliver.
He added that the money markets have fluctuated between a 50%-60% likelihood of another near-term rate cut.
Financial outlook improving, regardless of RBA whims
“Australian borrowers would have welcomed a cut to interest rates without a doubt,” said Anja Pannek (pictured, left), chief executive of the Mortgage and Finance Association of Australia (MFAA).
But brokers’ clients’ overall financial outlook has already improved following three rate cuts in July. “We are also seeing a significant improvement in refinancing conditions – with brokers reporting these are more favourable than they have been in several years,” added Pannek.
Blake Buchanan, general manager at mortgage aggregator Specialist Finance Group, said: “While this decision reflects the (RBA’s) typically conservative and anticipated approach, it does little to relieve pressure on households”.
Low unemployment rates were a significant factor in the hold, added Buchanan, but SFG nonetheless expects a clearer case for a rate cut to emerge in time for the November RBA meeting.
“The RBA tends to work on data on the way up but thoughts and feelings on the way down – so we shall see,” Buchanan said.
While inflation has returned to the RBA’s 2-3% comfort zone, “the economic outlook is uncertain” said Anthony Waldron, chief executive of Mortgage Choice. “Data from the Australian Bureau of Statistics showed that the unemployment rate was steady in August. However, tightness remains in the labour market, which could put upward pressure on inflation.”
Buying season looms
Loan Market chief executive David McQueen expects borrower activity to remain buoyant throughout the spring buying season despite today’s hold.
Loan Market’s pre-approval figures are up 29.5% year on year, noted McQueen, “as borrowers seek to position themselves in tightly held property markets”. Auction clearance rates are also looking good, he added, having edged above 70% in Sydney and Melbourne.
“Brokers will be sought out for their commitment to financial literacy over the remainder of 2025 and into 2026,” said McQueen.
“It is quite clear the board appears to be waiting for clearer signs that inflation is sustainably within target before considering further rate cuts,” added outsource Finance chief executive Tanya Sale (pictured, centre).
September inflation figures (due on 29 October) are therefore likely to guide the RBA’s next rate call in November.
Signs of stability
Over at NAB, Adam Brown, head of broker distribution, said today’s results gives households “a degree of stability as they plan for the months ahead”.
Brown reaffirmed NAB’s forecast of rates staying put until May 2026 – the most hawkish prediction among all banking majors.
"The RBA’s decision to hold the cash rate steady signals caution, yet it is expected considering inflation returns to a 12-month high,” said Mark Haron, executive director of mortgage aggregator Connective. “However, many in the market would still call it excessive given weak GDP growth, subdued consumer sentiment and households remaining under pressure.”
Housing demand has proven resilient despite the RBA’s cautiousness, with Connective data showing home loan applications surged to nearly $40 billion in the second quarter, compared to last year’s 31 billion.
“Signs for Q3 are also strong, with applications already at $39.48 billion, and a week still left in the quarter,” Haron said. "It is clear that borrowers are re-engaging with the market despite affordability constraints and a shortage of property stock that continues to keep prices high. Refinancing also remains a critical theme and borrowers are increasingly willing to switch lenders who do not pass on rate cuts quickly.”
Haron does not expect another rate cut this year. “Brokers should help clients prepare for that possibility as it may spark a wave of buyer activity and refinancing decisions as the spring season gathers pace.”
Regardless of the RBA’s current path, “I’d encourage anyone looking to make a move into the market to start the process and get their ducks in a row”, said Waldron. “Navigating a competitive market can be daunting, especially if you’re doing it for the first time. Expert advice from a mortgage broker can make a world of difference."
Seeking out alternatives
"Our message to customers should be not to budget on the assumption of more interest rate cuts in the near future,” said Finance Brokers Association of Australia (FBAA) managing director Peter White (pictured, right).
White urged brokers to inform their customers of the full range of options on the table.
"Brokers should encourage customers to talk to their lender first and ask for a rate reduction, but if this is rejected, explain that there may be refinancing options," he said.
"Some borrowers may assume the major banks are the only lenders, as they are unaware of the many second-tier banks and non-bank lenders with excellent mortgage products, some of which are only offered through mortgage brokers.”
