Australian mortgage brokers have kicked off 2026 navigating an unexpected rate move and a market that still refuses to cool.
Herron Todd White’s Month in Review – February 2026 notes that the Reserve Bank lifted the cash rate from 3.6% to 3.85% at its first meeting of the year, targeting what it calls “stubbornly high inflation”. For borrowers who had settled into a period of stability, this was a hike that had been “considered entirely unlikely just months ago,” the report says.
However, the firm points out that this is a very different environment from the rapid tightening cycle that ran from 0.1% to 4.35% across 2022–23. Starting from 3.6%, an extra 25 basis points “reflects far less additional repayment pressure than the previous moves,” said Kevin Brogan (pictured), national director for group risk at Herron Todd White.
In theory, higher rates, APRA’s 3% serviceability buffer, and rising household expenses should be enough to drag down buyer demand. In reality, the bigger story for brokers remains supply – or the lack of it.
Drawing on Cotality figures, Herron Todd White highlights that overall residential listings are around “20% below the five-year average”. At the same time, new dwelling construction is running 25–30% under the federal Housing Accord trajectory, while build costs and project risks remain elevated. That combination is restricting new stock just as population growth and investor interest remain strong.
For front-line brokers, this translates into a pipeline of willing but constrained buyers who are being forced to compromise on location, size, or quality rather than exit the market altogether. Competition is fiercest in the sub‑median segment, where first-home buyers using grants and guarantee schemes are going head‑to‑head with investors drawn by improving rental yields.
The report notes that the auction market returned from the summer break with “significantly higher auction activity… and stronger clearance rates” than the same period in 2025, suggesting many vendors rushed to sell ahead of the February rate decision.
Sentiment data from the Australian Property Institute’s Property Market Outlook Index, to which Herron Todd White valuers contributed, shows a residential confidence reading of 7.5 out of 10 for the final quarter of 2025, softening only slightly to 7.3 for the next three months. Western Australia, Queensland, and South Australia lead on confidence, while New South Wales and Victoria trail, pointing to slower but still positive growth expectations in the larger eastern states.
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