RBA Rate Rise Looms: How 4.60% Would Hit Borrowers
All four major banks expect a 25bp hike on September 29. New research shows each rate rise can lock up to 30,000 households out of home ownership.
Australia's borrowers are days away from what could be the fourth interest rate rise this year, with the Reserve Bank of Australia's monetary policy board meeting on Monday and Tuesday, 28 and 29 September 2026. All four of Australia's major banks are now aligned on their forecast: a 25 basis point increase that would take the official cash rate from 4.35% to 4.60%.
That consensus hardened after RBA Governor Michele Bullock signalled in September that upside risks to inflation are materialising. "Developments since [the August meeting] suggest that although growth in the Australian economy is slowing, some of these upside risks to inflation appear to be materialising," Bullock said. By the third week of September, futures markets placed the probability of a hike at more than 90%.
What a 4.60% Cash Rate Means for Home Buyers
Every time the RBA moves, the impact ripples directly onto variable-rate mortgage holders. With the cash rate already sitting at 4.35% after three increases this year, another 25 basis point rise means borrowers on standard variable loans will likely see their repayments adjust upwards once lenders pass on the increase.
For those still trying to get into the market, the story is more complex. ABC News reports on new economic modelling by James Graham, a senior lecturer in economics at the University of Sydney, finding that each standard 0.25 percentage point rate increase causes an immediate 5% decline in home purchases.
The research, conducted with Avish Sharma — a PhD candidate at Northwestern University and former Reserve Bank analyst — finds the damage compounds over time. Within weeks of a rate rise, the home ownership rate falls by 0.1 percentage points, peaking at a decline of 0.3 percentage points four years later.
Up to 30,000 Households Locked Out by Each Rate Rise
ABC News reports Dr Graham put the numbers in context: "The home ownership rate at the moment sits at about 66 per cent. So you're talking about maybe one-third of a per cent knocked off that 66 per cent."
With close to 10 million households in Australia, that translates to up to 30,000 households locked out of home ownership by a single rate rise. The research suggests some of those households remain locked out for more than a decade. Changing life circumstances — new jobs, children, or a change in the bank's lending appetite — mean that missing the right window to buy can become a very long delay.
Housing affordability was already at an all-time low heading into this potential rise, with households earning a typical income only able to afford around one in every 10 properties sold last financial year.
Crucially, the research found that the lower house prices typically associated with rate rises don't fully offset the cost of tighter borrowing conditions for most buyers. "If you're struggling to get that mortgage or your income's falling, so you're going to struggle to repay that mortgage, the fact that the house is cheaper doesn't help," Dr Graham told ABC News.
What You Can Do Before Tuesday
The RBA meeting is days away, but you are not without options. If you are on a variable rate, now is the time to check whether your current loan is competitive. The three rises this year have not been passed on evenly by all lenders. Some borrowers are sitting on back-book rates that have drifted well above what is available to new customers. Use our refinance savings calculator to see whether a switch could save you money.
ANZ is forecasting rate hikes at both the September and November RBA meetings. If you are approaching your borrowing power ceiling, acting before Tuesday could make a meaningful difference to your loan serviceability assessment.
Brokers contacted by Australian Broker consistently made the same point: rate rises do not remove buyers from the market, they change what buyers can afford. "Buyers may need to adjust their budget, suburb or expectations," says Cara Julian, founder and director of Melbourne-based Brava Finance. "Instead of 'How much can I borrow?' it becomes 'What can I comfortably afford and how do I make this work?'"
If you are actively searching for a loan, now is a good time to compare the cheapest home loans available. Lender competition does not disappear during a rate-rise cycle — if anything, the spread between the most and least competitive lenders can widen as the cycle matures.
The Serviceability Buffer Question
Dr Graham raised one structural issue that deserves attention: whether APRA's current 3 percentage point serviceability buffer — applied above the prevailing mortgage rate when assessing loan applications — still makes sense at this point in the rate cycle.
As interest rates have risen sharply since their post-COVID lows, the buffer has remained unchanged. The effect is that the hurdle to qualify for a loan has risen significantly beyond what many borrowers expected. Dr Graham suggested policymakers could consider whether such a large buffer is still warranted given where rates now sit.
For buyers who have been surprised by how much their pre-approval amount has fallen since the rate-rise cycle began, the serviceability buffer is a key part of the explanation. Use our repayment calculator to model how repayments change at different rate assumptions, or speak with a broker who can assess your full picture.