Key takeaways
The RBA increased the cash rate by 0.25 percentage points to 4.60% at its September 2026 meeting, the fourth rise in 2026.
If lenders pass on the full increase, repayments could rise for some borrowers and estimated borrowing capacity may fall.
A $700,000, 30-year owner-occupier loan could cost about $116 more per month, or around $1,392 more per year, after a full 0.25 percentage-point pass-through.
Now is a good time to review your home loan and check if it still suits your needs. An Aussie Broker can help you understand your options.
The Reserve Bank of Australia (RBA) has increased the cash rate by 0.25 percentage points to 4.60% at its September 2026 meeting.
The decision marks the fourth rate rise in 2026, following three consecutive increases earlier in the year.
The latest available ABS data showed annual CPI inflation eased to 3.5% in July, while trimmed mean inflation remained at 3.6%. Both measures were above the RBA’s 2-3% target range.
In its August minutes, the RBA said inflation remained too high and that it would remain attentive to the data and evolving risks, including the possibility of raising the cash rate again if upside inflation risks materialised.
Some economists, including ANZ, are forecasting a further 25 basis-point increase in November, which would take the cash rate to 4.85% by the end of 2026.
This remains a forecast, not a confirmed RBA decision, and may change as new economic data becomes available.
Dr Diaswati Mardiasmo, Chief Economist at PRD Real Estate, said: “At the moment, based on everything the RBA has released, we are looking at a higher interest rate environment, at least until the first quarter of 2027, with some more stabilisation in early 2027 and possibly a cash rate cut in mid-to-late 2027.”
A rate rise typically increases repayments for borrowers if their lender passes on some or all of the change. Lenders can set their own timing and pricing, so the effect will vary by lender, loan and borrower circumstances.
Mardiasmo said a further increase would mark a shift into a higher-rate environment: “That’s where the pain is really going to start because it’s not a neutral position anymore. It’s proper tightening.”
If you have a home loan and are thinking about refinancing or are planning to buy, now's the time to work out how this increase could affect your repayments, borrowing power, and plans.
Why did the RBA raise rates in September?
Inflation remains above target
Annual CPI inflation eased to 3.5% in July, but trimmed mean inflation remained at 3.6%, above the RBA’s 2-3% target range.
In its September decision, the RBA said some of the upside risks to inflation it had previously identified were materialising.
It pointed to further disruptions to global oil supply, higher-than-expected growth and inflation in Australia, and higher fuel prices flowing through to the prices of other goods and services.
The RBA said: “But inflation is still too high and the Board judged that, in light of recent developments, a further tightening in financial conditions is warranted to support a return of inflation to target in a reasonable period.”
Shane Oliver, AMP Bank chief economist, said before the decision: “Unfortunately, with the July inflation numbers, those risks seem to have materialised.”
The RBA remains focused returning inflation to target
The RBA said it remains focused on ensuring high inflation does not become embedded, and that demand needs to remain subdued for a period to reduce capacity pressures and bring inflation back to target.
While the RBA acknowledged that the economy appears to be slowing following the three earlier rate increases this year, it determined that recent inflation developments warranted another increase.
The Board also left the door open to further tightening, saying it would continue to do what it considers necessary to bring inflation sustainably back to target, “including increasing the cash rate target further if needed.”
Saul Eslake, Independent Economist, said before the decision: “It is purely and simply that inflation has been too high for too long.”
What a rate rise could mean for your repayments
If a lender passes on the full 0.25 percentage-point increase, repayments on a variable home loan may rise.
The example below uses a $700,000 owner-occupier loan over 30 years with principal and interest repayments.
Example loan | Estimated additional cost |
|---|---|
$700,000 | ~$116/month or ~$1,392/year more |
Illustrative example only. Actual repayments will vary depending on the loan amount, interest rate, loan term, repayment type, lender pricing, and fees. Lenders may not pass on RBA changes in full or at the same time.
Understanding how repayments may change can help borrowers plan ahead, review their budget, and explore options that may suit their circumstances.
What a rate rise could mean for borrowing power
Higher interest rates may reduce estimated borrowing capacity, although the effect depends on lender criteria and individual circumstances.
The September scenario uses a 3.00% serviceability buffer and a $700,000 base borrowing capacity.
Example borrowing capacity | Estimated reduction |
|---|---|
$700,000 | ~$14,800 |
Illustrative example only. Actual borrowing capacity will vary depending on income, expenses, existing financial commitments, lender policy and individual circumstances. Lending criteria apply and approval is subject to lender assessment.
Understanding how borrowing capacity may change can help prospective buyers plan their budget, assess their options, and set realistic property goals.
What four rate rises could mean for first home buyers
For first home buyers, a lower property price doesn't necessarily translate into greater borrowing capacity.
Higher interest rates can reduce how much a lender may be willing to lend, which means buyers need to consider both property prices and their borrowing position when working out what they can afford.
New Aussie Home Loans modelling illustrates how the four rate rises in 2026 could affect a first home buyer couple earning a combined $200,000.
Based on the modelling, the couple's estimated maximum borrowing capacity falls from $1.089 million at a representative variable rate of 5.40% before the year's rate increases, to around $991,000 at a representative variable rate of 6.45% following the September increase.
That's a reduction of approximately $98,000 in estimated borrowing capacity across the four rate rises.
Variable rate | Estimated maximum borrowing capacity | Change from pre-rise scenario |
|---|---|---|
5.40% – before the three earlier 2026 rate rises | $1,089,000 | – |
6.15% – after the three earlier 2026 rate rises | $1,013,038 | -$75,962 |
6.45% – following the September rate increase | $991,071 | -$97,929 |
The modelling also puts the impact into context alongside the Federal Government's housing tax reforms. The Government has said Treasury modelling indicates the reforms could moderate house-price growth by around 2 percentage points for a couple of years.
The two figures aren't directly interchangeable: one estimates borrowing capacity for a particular household scenario, while the other relates to the expected effect of tax policy on broader house-price growth.
However, together they illustrate why first home buyers may need to look beyond property prices when assessing affordability.
Sebastian Watkins, Chief Executive Officer of Aussie, said the ability to finance a purchase ultimately matters when buyers are deciding what they can afford.
“First home buyers can't take a policy promise to an auction. They can only bid what a bank will lend them. Unless inflation is brought under control, further rate rises risk closing the door on first home buyers faster than modestly lower prices can open it.”
That doesn't mean higher rates remove every opportunity for prospective buyers. Softer conditions in some markets may give prepared buyers more choice or room to negotiate, depending on the property and location.
Sebastian said understanding your position before entering the market was particularly important in the current environment.
“The goal should be understanding your position, getting clear on what's realistic and being ready when the right opportunity comes along. Brokers and buyer's agents exist to help you make a confident, informed decision, and getting support is more important than ever when the market is this tough.”
For first home buyers, that could mean checking your current borrowing capacity, setting a budget based on repayments you can manage and understanding how lender criteria may affect the amount you can borrow before making an offer.
What a rate rise could mean for you
Interest rate increases can affect borrowers differently depending on where they are on their property journey.
Here are a few things different borrowers may want to consider.
Borrower type | What you can do if rates change |
|---|---|
First home buyers | - Check your current borrowing capacity before making an offer, as higher rates may affect how much you can borrow. - Review your budget and consider what repayment level would be manageable for you. - Conditional pre-approval may help you understand your position, subject to lender assessment and any changes in circumstances. |
Investors | - Review rental income, loan repayments, and cash flow against higher borrowing costs. - Compare investment loan rates, as pricing can vary between lenders. |
Refinancers | - Check whether your lender passes on the rate rise in full and when it takes effect. - Compare your rate with what new borrowers are being offered, while checking eligibility and fees. - Reviewing your loan or refinancing may help you understand whether a different rate or loan feature suits your circumstances. |
What choices could you make now?
A rate rise could increase repayments for borrowers whose lenders pass on some or all of the change, while prospective buyers may also see their estimated borrowing capacity change.
The impact will depend on the loan, lender, and individual circumstances.
For Sebastian, today's decision is a prompt for borrowers and buyers to understand where they stand rather than assume their position hasn't changed.
“Rate apathy is expensive. When rates change, taking time to review your loan may help you understand whether your current arrangements remain suitable," he said.
"Whether you already have a mortgage, are applying for one, or are trying to upgrade, standing still can mean paying more, losing borrowing power or missing support that could change your position," he added.
For borrowers considering their next move, this may be a good time to:
Review your current interest rate and home loan features.
Compare refinancing options, including any fees and eligibility requirements.
Reassess your borrowing capacity before making property decisions.
Check whether your budget could accommodate future rate movements.
Speak with an Aussie Broker about strategies that may suit your circumstances.
While today's decision may require some borrowers to reassess their plans, understanding your options can help you make informed decisions with greater confidence.
Rate Radar can help you keep an eye on your home loan rate
If you already have a home loan, Rate Radar in the Aussie app can monitor your rate over time and alert you when a change or rate may be worth a closer look, based on your savings target set in the app.
From there, an Aussie Broker can help you compare whether negotiating or refinancing may suit your circumstances.
Set up Rate Radar in the Aussie app today to keep an eye on your rate and be alerted when an option worth considering appears.
A rate rise doesn't mean you have no options
Higher repayments or a change in estimated borrowing capacity may prompt some borrowers to review their loan, compare available rates, and check whether their current structure still suits their circumstances.
Any potential benefit will depend on eligibility, lender pricing, fees and individual circumstances.
Rather than trying to predict the next RBA move, borrowers may find it useful to understand how the September increase could affect their own repayments and borrowing position.
If you're keeping an eye on future rate movements from our lender panel, our Interest Rate Tracker provides ongoing updates on RBA decisions, forecasts and what they could mean for borrowers.
You can also check out Aussie’s Low Rates Roundup for a regular look at selected home loan rates from our lender panel. Rates, eligibility and loan features vary, so it’s worth checking what may suit your circumstances.
When rates rise, it helps to have someone on your side. Whether you're buying, refinancing or checking in on your current loan, an Aussie Broker can help you make sense of your borrowing power, explore your loan options, and plan ahead with your goals in mind.
