Mortgage brokers face a tougher autumn as stubborn inflation and looming rate hikes threaten to crimp borrowing capacity and unsettle first-home buyers and property investors.
Australia’s latest inflation print offers limited comfort, with CPI up 3.7% over the year to February. Housing remains the major driver, rising 7.2% as higher rents, electricity, and new dwelling costs feed through to clients’ budgets.
“The 3.7% annual CPI inflation to February eased slightly from the 3.8% annual CPI inflation to January,” ABS head of prices statistics Sue‑Ellen Luke said in a media release.
Trimmed mean inflation, a key measure for the Reserve Bank, held steady at 3.3%, suggesting underlying price pressures are easing only gradually rather than falling away.
Commenting on the latest CPI results, Westpac notes that February delivered the softest core inflation update in just over six months, but still only a moderate easing in underlying pressures. Senior economist Justin Smirk said the bank expects headline inflation to peak around 5 1/2% by mid‑2026, driven largely by higher fuel costs.
For first-home buyers and property investors, that persistence matters because it shapes expectations for further cash rate hikes and tightens borrowing capacity. Core inflation is still above the RBA’s 2%–3% target band, reinforcing market expectations of a third consecutive cash rate rise in May, as forecast by all four major banks.
Another increase could add about $91 a month to repayments on a $600,000 owner‑occupier mortgage with 25 years remaining, taking the total hit from three hikes in three meetings to $272 a month.
That equates to a 7.4% jump in repayments in just four months. This rise outpaces the current annual inflation rate and piles further strain on household budgets already facing elevated grocery and services costs.
The current CPI data predates the latest conflict in the Middle East and the associated spike in crude oil, pointing to further upside risks for petrol prices and headline inflation in coming months. That combination keeps pressure on mortgage rates and may further squeeze borrowing capacity for more highly leveraged borrowers.
The latest “CPI figures offer little reprieve in the fight against inflation,” Canstar.com.au data insights director Sally Tindall said.
Tindall warned that “there’s no calm before the storm, but instead, persistent inflation that is set to spike once the Middle East conflict hits next month’s data, just six days out from the RBA’s next meeting.”
For brokers working with construction clients or off‑the‑plan buyers, building cost inflation is another key concern. The cost of a new home rose 3.7% over the year to February, the fastest pace since October 2024, while rents have increased 3.8%.
Master Builders Australia chief economist Shane Garrett noted that “during February 2026, new home building costs surged to a 16-month high while rents have grown by 3.8% over the past year.”
With surging diesel prices and supply chain disruptions lifting transport and materials costs, brokers may see more clients needing higher construction contingencies or reassessing project feasibility.
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