Login
Property market regresses by over a decade as RBA hands cash rate decision
At its sixth meeting of the year, the central bank announced its latest cash rate decision amid ongoing global tensions, higher cost of living and a slower property market.
It was without any surprise that the Reserve Bank of Australia (RBA) increased the cash rate by 0.25 per cent to 4.60 per cent during its sixth meeting of the year.
The move has taken the cash rate to a 15-year high, to the highest setting the nation has seen since October 2011 and well beyond the hikes seen in 2022–2023.
The RBA’s decision followed higher inflation results, with the consumer price index (CPI) rising 3.5 per cent in the 12 months to July 2026, from 3.8 per cent in the 12 months to June.
Similarly, the big four banks reviewed their forecast, with Westpac, CBA, and ANZ moving their rate-rise prediction from November to September a week before the board meeting.
PRD chief economist Dr Diaswati Mardiasmo said the latest rate hike has marked a turning point in the country’s economic situation.
“It is a tipping point in our economy, as we have had 3 cash rate cuts in 2026 and 3 cash rate hikes in 2026, which meant that prior to today (cash rate hike number four for 2026), we were in equilibrium.”
“This is where the ’real’ pain starts,” Mardiasmo told SPI.
She said the RBA has hiked to keep inflation down and avoid blowing out the cost of living for other goods and services as we remain above the board 2–3 per cent target range.
According to Finni principal and mortgage broker Eva Loisance, the rate hike will further cool buyer demand, signalling to borrowers and investors that while the tightening cycle still has momentum, uncertainty remains the dominant theme.
She said a 0.25 per cent rise cuts borrowing capacity by around $11,200 for an average full‑time income borrower, bringing the total to a whopping $47,400 lost since January 2026 and pushing a meaningful number of borrowers entirely out of the qualifying range.
“Entry‑level homes rely heavily on sentiment-driven demand, so a hike tends to cool activity quickly and reduce competition at the lower end.”
“This will especially affect first home buyers (FHB) with higher assessment rates now well above 9 per cent,” Loisance told SPI.
In addition to lowering borrowing power, Loisance said that arrears could increase as the 0.25 per cent hike adds approximately $119 per month to repayments on a typical $731,000 mortgage, bringing total increases to about $480 per month since the beginning of the year.
Free investor loan check
Better property decisions start with smarter lending.
A free 15-minute finance check for property investors.
What are your lending goals?
Choose a goal to request a callback.
Ready to talk?
Book a 15-minute call →Finni Pty Ltd · Australian Credit Licence 384324 · Privacy
“Arrears remain low by historical standards, but the trend is upward. The cumulative effect of repeated hikes, rising living costs, and the sense that the peak is still uncertain is driving stress.”
“The hike reinforces that pressure and likely accelerates the number of borrowers entering early‑stage arrears over the next quarter.”
Opportunities remain
While higher interest rates will create challenges across the market, Mardiasmo said agents, buyers, investors and sellers could still find opportunities by adjusting their strategies.
She said higher interest rates were reducing borrowing capacity and increasing mortgage repayments for buyers and investors, which could weigh on demand and put further pressure on prices.
However, she said that buyers who were financially ready could use softer market conditions and lower demand to enter the market.
“Capitalise on lower demand, softer market, potentially lower pricing, etc. You may pay a slightly higher rate for mortgage repayments now, but you can make up the savings later on down the track should there be a cash rate cut (currently predicted in mid-late 2027).”
“For investors, they need to focus on the goal of ensuring that the investment property can work for you in terms of cash flow, especially by adjusting your rental income to match (i.e the rent that you charge).”
For sellers, Mardiasmo said higher interest rates had narrowed the pool of prospective purchasers rather than removed demand altogether, with those still active in the market more likely to be serious about making a purchase.
“Targeted campaigns that focus on the property’s value-adds, and adjusting pricing expectations accordingly, will go a long way toward selling your property faster.”
Want to see more stories from trusted news sources?
Make Smart Property Investment a preferred news source on Google.
Click here to add Smart Property Investment as a preferred news source.
