iscover 
The Reserve Bank of Australia (RBA) announced today (16 June) that it would maintain the cash rate at 4.35 per cent, a decision that had been forecast by all four major banks.
The decision comes, however, after three consecutive rate hikes, leaving the mortgage market in a very different place to the 3.6 per cent world of late 2025.
Since the December meeting, Australia has been rocked by a fuel shock stemming from conflict in the Middle East, stubbornly high inflation, and a highly consequential federal budget.
All of this has changed borrower behaviour, and brokers have noticed.
Cautious behaviour
After showing robust growth at the start of the year, the mortgage market has begun to lose momentum.
The latest data from Equifax, which tracks credit inquiries across the banking system, found that overall mortgage demand was 10.7 per cent higher in January than a year earlier. However, that growth shifted to a 0.9 per cent decline in April and a 6.6 per cent drop in May.
New mortgages for first home buyers were up 7.1 per cent in January, but had fallen 9.1 per cent by May.
Melanie Smith, franchisee at Aussie Richmond in Brisbane, said she was seeing clients take a more cautious approach.
“Clients are still inquiring and still wanting to buy, refinance or invest, but the conversations are more considered,” she said.
“Borrowing capacity, monthly repayments and living costs are front and centre. People are not necessarily saying no to property, but they are asking more questions, taking longer to make decisions, and wanting to understand the full impact before they commit.”
Brett Sutton, mortgage broker at Two Red Shoes, described the current environment as a “tale of two markets”.
“Owner-occupiers who are already pre-approved and actively looking are using the current conditions to their advantage. Less competition at auctions and inspections means they’re able to negotiate harder,” he said.
“On the other hand, fresh inquiries have slowed. A lot of people are sitting on the sidelines waiting for the dust to settle, both from a rates perspective and a budget perspective.
“For those who are moving forward, conversations have shifted from ’How much can I borrow?’ to ’How much should I borrow, and what structure makes the most sense?’”
Jonathan Preston, senior mortgage broker at Home Loan Experts, also said he had seen inquiries slow, although not solely because of the recent rate hikes.
“Investors are holding back. There are fewer inquiries, less urgency, and people are saving cash out of fear,” Preston said.
“People seem terrified that the market will go down, and there is a lot of talk about how the new tax regime is making life harder, on top of the high cost-of-living pressures everyone is already experiencing.”
Investors eye the long run
Brokers also said that investor clients were becoming more cautious.
Westpac economists have already forecast that new investor activity could fall 34 per cent in the near term, while total housing market turnover is expected to decline by 20 per cent.
Smith said much of the caution among her investor clients relates to cash flow and holding costs.
“Some are still looking for opportunities, particularly where there is equity or a long-term strategy, but they are much more conscious of buffers and repayment comfort,” Smith said.
Similarly, Eva Loisance, principal at Finni, said to Broker Daily that the higher-rate environment, combined with the proposed changes to negative gearing, had forced many investors to recalculate their borrowing capacity.
“There’s hesitation, not in whether they’re going to go ahead, but more in taking the time to work through the numbers,” Loisance said.
Nonetheless, Loisance said the current environment could also create opportunities.
“I think there’s a huge opportunity in refinancing. A lot of investors with existing portfolios are looking to refinance their loans back to longer terms with interest-only periods to free up cash flow. That can also improve their servicing capacity for the next property,” Loisance said.
“While we might see fewer first-time investors or repeat buyers entering the market, many are shifting their mindset towards improving what they already have. They’re asking ’What can I optimise in my current portfolio to better position myself for what’s coming next?’
“So it’s not necessarily less business, it’s just different business.”
The ’new normal’
Brokers agreed that significant rate relief is unlikely in the near term.
The big four banks are also in agreement that a rate hike is unlikely this year.
“My view is that we are close to the top of the rate cycle, but I don’t think borrowers should be banking on quick relief,” Smith said.
“I think we are likely in for a sustained period where rates remain higher than many borrowers became accustomed to over the past decade.”
Sutton said that while inflation remains elevated, the RBA’s mandate has not changed.
“While a pause is plausible as the RBA assesses the impact of recent hikes, I wouldn’t call this the end of the cycle yet. Borrowers should plan for the possibility that rates above 4 per cent become the ’new normal’ for some time,” Sutton said.
[Related: Opposition Leader meets brokers as CGT backlash builds]
Want to see more stories from trusted news sources?Make Broker Daily a preferred news source on Google.