Borrowers face prolonged pressure as cash rate stays at 3.60%
The Reserve Bank of Australia (RBA) has kept the cash rate unchanged at 3.60% at its final meeting of 2025, extending a run of three pauses after three cuts earlier this year from a peak of 4.35%.
For existing mortgage holders, the pause means no immediate repayment relief and little prospect of cuts in the short term. The RBA decision locks in a higher-for-longer rate environment that continues to weigh on mortgage affordability.
“Annual CPI ticked up to 3.8% in October,” said Anja Pannek (pictured top left), chief executive officer of the Mortgage & Finance Association of Australia. “Economists are warning that services inflation remains sticky, household spending is running hotter than expected, and the RBA is wary about moving prematurely.”
Real Estate Institute of Australia president Jacob Caine (pictured top centre) said households already under pressure would see little benefit from the latest RBA decision. “Today’s pause does not ease the pressure on mortgage holders,” he said. “With inflation still high and the labour market tight, rate cuts are unlikely in the near term, meaning housing affordability pressures will continue into 2026.”
Market pricing and most major bank forecasts point to the cash rate remaining on hold for an extended period, with only a minority expecting cuts in 2026. For lenders and brokers, that suggests a sustained focus on refinance activity, repricing negotiations and restructuring of existing facilities rather than planning for a rapid easing cycle.
Brokers are expected to play a central role in helping clients manage higher servicing costs and tighter buffers. “A rate hold doesn’t mean a borrower should sit still,” Pannek said. “Brokers are expertly placed to review your loan, negotiate sharper pricing or explore alternatives.
“We’re seeing strong activity across the market and borrowers are looking for savings wherever they can find them. The expanded 5% Deposit Scheme is also contributing to a surge in activity in the first home buyer segment and despite the steady rate environment, investor activity also remains strong.”
For new borrowers, borrowing capacity has improved slightly through this year’s 75 basis points of rate cuts, but higher dwelling values and living costs have offset part of that benefit. Tim Lawless (pictured top right), research director at Cotality, noted that broader economic conditions were still robust enough to justify the RBA’s stance, with tight labour markets and signs of stronger private investment and household spending.
Lawless said housing dynamics remain a critical part of the policy backdrop, even if prices sit outside the RBA’s formal mandate. He pointed to continued price growth as a sign that credit and demand remain resilient despite elevated mortgage rates, supported by low stock levels and policy incentives for first home buyers.
While national price growth has started to moderate, affordability and serviceability constraints are expected to intensify into 2026. For mortgage professionals, that is likely to mean more complex assessment of clients’ buffers, income resilience and product suitability, particularly at the lower end of the market where activity is strongest.
Lower-priced segments, including many first-home buyer properties and investor stock, are seeing the sharpest value gains as demand is pushed away from premium locations. That divergence is likely to drive further demand for advice on loan structures, fixed versus variable strategies, and the use of government schemes to bridge deposit and serviceability gaps.
Pannek said the current environment underlines the importance of access to advice as households navigate higher repayments and a competitive lending market.
“In a market shaped by rate policy, expanded first-home buyer schemes, tight supply and high investor engagement, having expert home loan support is more important than ever,” she reiterated.
“With brokers remaining the channel of choice for Australian home buyers, with 77.3% market share, this underscores just how vital broker assistance is for households making major financial decisions.”
With the cash rate now expected to remain at 3.60% for some time, the focus for mortgage professionals will be on retention, risk management and tailored restructuring, rather than preparing clients for imminent rate cuts.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
