Inflation rises to 4.3% as housing costs keep pressure on borrowers

Australian inflation accelerated in September, leaving home buyers and mortgage holders facing continued uncertainty about interest rates.

The Australian Bureau of Statistics said the Consumer Price Index rose 4.3 per cent over the year to September 2026, up from 4.0 per cent in August. Trimmed mean inflation, which removes some of the most volatile price movements, increased from a revised 3.5 per cent to 3.6 per cent.

The figures were released less than a week before the Reserve Bank of Australia’s next monetary policy decision on 3 November. The cash rate is already 4.60 per cent after the RBA raised it by 0.25 percentage points on 29 September.

The September result does not guarantee another rate increase. It does, however, give the RBA little evidence that inflation has been brought comfortably under control.

Housing costs remain elevated

The ABS housing category increased 5.2 per cent over the year, faster than the overall CPI. Its main contributors were:

• new dwelling prices, up 4.7 per cent
• electricity, up 12.8 per cent
• rents, up 3.6 per cent
• property rates and charges, up 5.6 per cent.

Builders continued to pass higher labour and material costs into their base prices over the year. However, new dwelling prices were unchanged in September as discounts and promotions offered in response to weaker demand offset some price increases.

That distinction matters for buyers considering a house-and-land package. Published construction costs remain higher than a year ago, but softer demand may create room to negotiate upgrades, inclusions or the final price. Buyers still need to examine whether a promotion changes the total contract cost or simply shifts expenses between different parts of the package.

Rental prices rose 0.2 per cent during September and 3.6 per cent over the year. The annual rate has been unchanged since May, suggesting rent inflation is no longer accelerating nationally, although tenants are still paying substantially more than a year earlier.

The ABS said electricity’s annual rise largely reflected the end of Commonwealth rebates. Automotive fuel prices also rose sharply, adding another expense for households that live farther from jobs and services.

Why the RBA decision matters for property

The RBA said after its September increase that inflation was too high and that it remained prepared to raise the cash rate again if necessary. It also acknowledged that housing prices and new housing lending had weakened.

Treasury Secretary Jenny Wilkinson told a Senate committee on Wednesday that Australia’s high share of variable-rate mortgages allows monetary policy to pass relatively quickly to households. Higher rates and weak sentiment were increasingly visible in the housing market, she said.

For prospective buyers, the immediate issue is borrowing capacity. Lenders assess whether applicants could manage repayments at a rate above the actual loan rate. A higher cash rate can therefore reduce the amount a household qualifies to borrow even before that household has made an offer.

Existing borrowers should remember that a cash-rate change does not alter every mortgage immediately. Each lender decides whether to change variable rates and announces when any new rate will take effect. Fixed-rate customers generally remain protected until their fixed period expires, although refinancing options may become more expensive.

Sellers face a market in which buyers are increasingly sensitive to repayment estimates rather than just asking prices. Properties that require extensive renovations may be particularly exposed because households must fund both a mortgage and construction work at elevated costs.

What it means for you

• Buyers should have their borrowing capacity checked again before bidding or signing a contract.
• Variable-rate borrowers can review their loan margin, offset balance and refinancing options before the RBA decision.
• New-home buyers may find promotions, but should compare complete contract costs and provisional allowances.
• Rent growth has steadied nationally, but rents are still 3.6 per cent higher than a year ago.