RBA Rate Hike Could Wipe Another $47,400 from Borrowing Capacity

The Reserve Bank of Australia (RBA) is expected to raise interest rates for the fourth time in 2026, which could further reduce borrowing capacity for prospective home buyers.

According to Canstar analysis, an individual earning $108,650 a year could see their maximum borrowing capacity fall by another $11,200 following a 25 basis point increase, taking the estimated reduction since January to $47,400 or 9%.

This would not only increase mortgage repayments but also restrict the amount prospective buyers can borrow. For a couple each earning the same amount, Canstar estimates Tuesday's increase would reduce their combined borrowing capacity by another $22,400, taking the cumulative reduction this year to $94,700 or 9%.

However, property prices have been falling in some cities, particularly Sydney and Melbourne. If Westpac's forecast comes to pass and prices in Sydney drop by a total of 10% this year, then for some borrowers, they might find the cut to their home buying budget is less than the drop in prices in their area.