G'day.
Two headlines landed this week that seem to contradict each other completely.
On Friday, the ABC reported that national housing affordability has fallen to its lowest level on record — even after the price falls of the past year. On Monday, Broker Daily ran the companion piece: borrowing capacity is being squeezed harder than at any point since APRA started publishing comparable numbers.
And yet — in the same fortnight — realestate.com.au reported that mortgage lenders are cutting rates to fight for customers, even as NAB, Deutsche Bank and UBS all tip the RBA to hike the cash rate to 4.60% at the 29 September meeting.
A record-affordability crunch and a lender price war at the same time. Both things are true. Understanding why is worth real money if you're planning to borrow in the next six months.
How bad is the affordability number?
The FY2026 affordability data is grim on every axis:
- Repayments as a share of income for a new owner-occupier loan have never been higher — the combined effect of three cash rate hikes in the first half of 2026 and prices that fell far less than rates rose.
- Deposit hurdle: even at the soft July prices (Sydney −1.4%, Brisbane −0.6% in the Cotality data), a 20% deposit on a median dwelling still requires years of saving at current income growth.
- Serviceability squeeze: with variable rates around 6.2–6.5% and APRA's 3% buffer untouched, most borrowers are still being assessed near 9.5%. On a $100k income that's roughly $200k of theoretical capacity gone before living expenses are even counted.
In short: prices fell, but your ability to borrow fell faster. That's why affordability kept deteriorating through a downturn.
So why are lenders cutting?
Because volume is collapsing. Home-loan demand has plunged, the big banks' mortgage books are growing at their slowest pace in years, and APRA's September data shows the pullback is sharpest in investor lending.
Banks don't make money on rates — they make money on volume at a margin. When the pipeline dries up, the rational move is to shave the front-book rate to win the shrinking pool of borrowers who can still pass. That's what we're seeing: aggressive fixed-rate cuts of 0.10–0.25% at several majors and second-tier lenders, aimed squarely at strong files.
The key word is strong. This is a price war for the borrowers banks want — high income, low DTI, clean 90-day statements. It's not relief for the marginal borrower the affordability data is describing.
What a 29 September hike would do
If the RBA board lifts the cash rate to 4.60% on 29 September — which NAB, Deutsche Bank and UBS now all expect — the flow-through looks like this:
- Assessment rates rise ~25bp. Variable rates near 6.5% plus the 3% buffer puts assessment at roughly 9.75%. On a $100k income that's another $10,000–$15,000 of capacity gone.
- Fixed rates that are being cut now will reprice. The current fixed-rate discounts are being funded out of competitive desperation, not funding costs. A hike removes the cover for them.
- Repayments on a $735,000 average new loan rise ~$115/month at the margin — and the August RBA statement already has mortgage payments near their 2024 peak share of disposable income.
In other words: the lender price war is a window, not a trend.
How to use the window
- If you're ready, get assessed now. Pre-approvals are typically valid 90 days. Locking an assessment at 9.5% before a potential September move to 9.75% is free insurance — you're not obliged to draw down.
- Compare fixed and variable deliberately. The discounted fixed rates on offer look attractive, but remember the buffer applies above the revert rate for serviceability — fixing doesn't lift your assessed capacity. Run both paths.
- Make yourself the file banks are fighting for. The rate cuts are aimed at clean applications: every debt declared (CCR means they see it anyway), unused card limits closed, 90 days of stable spending, rent income documented against actual statements. The checklist in our September serviceability piece is the playbook.
- Don't forget the second constraint. Even if you pass serviceability, the 6x DTI cap — limited to 20% of new lending — is binding at the margin. Total debt, not just the mortgage, counts.
- Stack the tax position before you commit. At these assessment rates, the after-tax cashflow matters as much as the headline capacity. Run the purchase through the negative gearing calculator before you settle on a price ceiling.
What I'm watching
- 29 September, 2:30pm AEST. The RBA decision. A hike to 4.60% is now the bank-consensus view; a hold would surprise markets and extend the fixed-rate war.
- Whether the fixed-rate cuts survive the week. If funding costs reprice on hike expectations, the current discounts could vanish before the meeting even happens.
- The October APRA review. Record-low affordability and slowing credit growth is exactly the combination that builds the case for cutting the 3% buffer to 2.5% — the single biggest capacity lever in the country.
The ten-minute version
The system is split in two: for marginal borrowers, affordability has never been worse. For strong files, banks are cutting rates and competing again. The difference between the two groups isn't income — it's documentation and preparation. Complete statements, declared debts, a clean 90-day window, and every property's rent and expense history ready to hand over. That's literally what PropAlly organises for you. Founding-member beta is still open: 12 months of Pro, free, for 30 days of real use and a 30-minute feedback call. Apply here.
— PropAlly, Brisbane
General information only — not financial, tax, or credit advice. Interest rates, lender policies and regulator settings change frequently; confirm current rules with a licensed mortgage broker before acting.
