RBA Rate Rise Looms: What It Means for Your Mortgage
All four major banks expect the RBA to raise rates this week. Here's what borrowers need to know about house prices and their options.
The Reserve Bank of Australia's September board meeting began on Monday 28 September 2026, with a cash rate decision due Tuesday 29 September. After three rate hikes already this year, the official cash rate (OCR) sits at 4.35%. All four of Australia's major banks – ANZ, Commonwealth Bank, NAB and Westpac – are forecasting a further 25 basis point increase at this meeting, as reported by Australian Broker.
If they are right, the OCR will reach 4.60%, with Westpac forecasting it holds there through December 2026.
What a Fourth Rate Rise Costs Borrowers
Each 25 basis point increase has a direct and calculable cost to borrowing power. Analysis cited in Australian Broker puts the reduction at roughly $11,200 off the maximum loan available to a person earning around Australia's average wage of approximately $108,000. With three hikes already delivered this year, the cumulative reduction for an average earner is approximately $47,400 in borrowing capacity since the start of 2026.
ANZ has gone furthest in its forecasts, predicting five total rate rises across 2026. If that plays out, an average-wage borrower could see more than $58,000 stripped from their maximum borrowing power over the year. For first-home buyers and anyone who pushed to the limit of their servicing capacity in the past 12 to 18 months, that is not a rounding error – it can determine whether they can realistically participate in the market at all.
Borrowers on interest-only investment loans are also directly exposed, as the full rate increase flows straight through to monthly cash flow with no principal offset. Owner-occupiers ahead on repayments or still locked into a fixed-rate period have more protection for now – but those terms will expire, and the variable rate they roll onto will be higher than it was twelve months ago.
Brenton Hartley, broker engagement manager at technology platform Quickli, told Australian Broker that while higher rates tighten affordability, rate movements often trigger more borrower activity, not less. "Rate movements can stir up more conversations, with borrowers looking more closely at their repayments, questioning whether their current lender is still competitive and reaching out to their broker to understand what options they have," he said.
Use our borrowing power calculator to see what the current rate environment means for your specific circumstances, and model your monthly repayments at both current and potential future rates with our repayment calculator.
Westpac Revises House Price Forecasts Sharply Lower
Ahead of Tuesday's RBA decision, Westpac revised its house price forecasts sharply downward on 25 September 2026. The bank now expects a 7.3% peak-to-trough fall nationally – a correction on par with the 2022 downturn. For the full calendar year 2026, Westpac's September Housing Pulse forecasts a 6% fall across the five major capital cities, double the 3% decline it was projecting just three months ago in June.
National dwelling values have already fallen 3.8% in the three months to August, placing them 4.7% below their peak. Annual price growth has slowed to just 1% and is expected to turn negative when September data is released.
The correction is not uniform across the country. Westpac forecasts Sydney will bear the brunt with a 10% fall through 2026, and Melbourne a further 8% decline. Brisbane, Adelaide and Perth are expected to hold up considerably better, with modest gains of 2 to 3% still forecast, and Hobart is tipped to gain 4%. For buyers in Sydney and Melbourne in particular, this represents a materially changed picture from six months ago.
Commonwealth Bank's economists have taken an even more cautious view, forecasting a deeper national trough of approximately 9% from peak. Their 2% recovery outlook for 2027 is conditional on RBA rate cuts in May and August of that year.
Westpac is also forecasting a 3% national recovery in 2027, but has pushed any stabilisation out past the rate-rise cycle. A key constraint on how far prices can fall is tight supply: just 1.2% of all dwellings are currently listed for sale, well below the 20-year average of 1.8%. There is little sign of forced selling, and Westpac expects buyers – not sellers – to be the first to return when conditions shift.
"The run into year-end is shaping as a particularly nervy one for housing markets," Westpac's Housing Pulse report said.
Auction Markets Are Already Feeling the Pressure
Property markets are already pricing in a nervous few months ahead. Cotality data shows the weighted average preliminary auction clearance rate across capital cities dropped to 50.3% in the week ending 26 September – a 10-week low. Auction volumes also fell sharply: Cotality recorded 1,428 capital city auctions, down 22.4% on the previous week and 17.7% below the same week a year earlier.
Melbourne recorded a preliminary clearance rate of 48.8% – its weakest reading since the first week of September 2021. Adelaide fell to 39.3%, only the second time this year it has dipped below 40%. Brisbane has been below 50% in 18 of the past 19 weeks.
Westpac's house price expectations index sits at 110.3, well below its long-run average of 126. Investor credit growth has slowed from a peak above 10% annually to an annualised 8.5% over the past three months. Regulators have taken notice: the Council of Financial Regulators flagged at its September meeting that two risks are on its radar – lenders loosening serviceability standards to compete in a shrinking market, and mortgage stress spilling into the wider financial system. Westpac said there was little sign of either so far.
What to Do Before Tuesday's Decision
Whether the RBA hikes on Tuesday or surprises the market with a hold, the direction of rates for the remainder of 2026 is clear enough. This is not a period to be passive about your home loan.
First, check whether you are on a competitive rate. Lenders compete harder for new borrowers than they do to retain existing ones, and sitting still in a rising-rate environment often costs money. You can compare current home loan rates to see where the market is sitting right now.
Second, consider refinancing if you have not reviewed your loan in the past 18 to 24 months. Even a modest rate reduction can translate into meaningful savings on a standard-sized mortgage, and the gap between front-book rates and back-book loyalty rates is significant at the moment. Our refinance hub has a clear view of what is available across the market.
A broker can compare across a wide range of lenders – including non-bank lenders where rates can be more competitive than the major banks – and identify refinance options that are not always visible through a basic online search. Acting before a rate rise, rather than after, puts you in a stronger position at the negotiating table.