Rate rise hits house hunters, but will it drop property prices?
04 Feb 2026
The maximum amount people can borrow from the bank is set to fall in a matter of days following the announcement from all four big banks that they will be passing on the rate hike to new and existing customers.
Our analysis shows an individual earning the average full-time wage of $104,807 could potentially borrow $12,000 less as a result of the 0.25 percentage point rate hike.
Should a second 0.25 percentage point hike materialise in May, then this person could see their maximum borrowing capacity decrease by a total of $24,000 in a matter of months.
This is based on a person taking out an owner-occupier loan with no other debts, no dependents and minimum expenses. Figures are estimates and can vary between lenders.
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| Estimated decrease in borrowing capacity on the back of rising rates | ||
|---|---|---|
| Borrower | Feb hike | Feb + May hike (combined) |
| Individual (av. wage) | -$12,000 | -$24,000 |
| Couple (2 x av. wage) | -$24,000 | -$48,000 |
Source: Canstar. Based on an owner-occupier taking out a 30-year loan at 5.49% today, 5.74% from mid Feb and 5.99% in May. Assumes minimal expenses, no debts, no dependents, average wage based on ABS data. See full notes below.
Two of big four banks doubling down on rate hikes
On the back of yesterday’s cash rate decision and press conference, CBA’s economic team revised its cash rate forecast and now expects a second hike in May, in line with what NAB is already forecasting.
Westpac and ANZ have kept their forecast at one and done, however, both acknowledge that the risk lies with a further hike.
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| Current big four bank cash rate forecasts | ||
|---|---|---|
| Bank | Forecast | Cash rate at end of 2026 |
| CBA | 0.25 hike in May | 4.10% |
| Westpac | No further changes | 3.85% |
| NAB | 0.25 hike in May | 4.10% |
| ANZ | No further changes | 3.85% |
Borrowers should start planning for rates to move higher
Canstar’s data insights director, Sally Tindall, says, “Tuesday’s rate hike will shave roughly $12,000 off the average Australian’s maximum home-buying budget.”
“On its own, the February RBA increase is unlikely to be enough to torch home buying budgets across the country, but it could push some buyers to sit on the sidelines for now to see how many more hikes might lie ahead.
“The RBA has made it clear it is prepared to do what it takes to get the inflation job done. If the jobs market continues to hold up, but inflation remains unmanageable, then at least one, potentially multiple rate rises could come our way.
“This return to rate hikes will probably take some momentum out of the property market, but a widespread fall in prices is unlikely.
“Across the last round of rate hikes in 2022 and 2023, when the cash rate shot up by 4.25 percentage points, prices should have, at least in theory, dropped. Instead, by and large, they defied gravity due to a lack of stock compared to demand.
“This time around, growth in property prices could slow for a period, however, it’s not likely to do a U-turn because the same pressure point, that is, an imbalance between supply and demand, remains.
“With CBA joining NAB in tipping a second hike in May, borrowers should start planning for rates to move higher and remain there for the foreseeable future.
“The bank will stress test your budget to make sure you can still afford the mortgage at a rate that’s 3 percentage points higher than what you are applying for. This is a highly unlikely scenario in the near future, however, a mortgage can be up to three decades long and a lot can happen in this time.
“If you’re about to take on a whopping great loan, it’s worth running this stress test yourself. At the end of the day, you’re the one who has to pay back that money, with interest.
“For buyers already doing the Saturday rounds with a pre-approval in their back pocket, it’s worth going back to your bank to reconfirm your budget. While you’re there, factor in the possibility of further hikes.”
Borrowing power notes: Based on someone taking out a 30-year owner-occupier loan at the average new customer variable rate (RBA). Assumes $24k p.a. of expenses for one individual with no debts and no dependents. Income is based on the ABS weekly ordinary time full-time earnings in original terms. Does not factor in wages growth. Borrowing power based on 90% of post-tax income available to service the loan and expenses, and a 3.00% interest rate buffer. Tax calculations based on the current financial year, excluding Medicare Levy. Borrowers should seek personal financial advice before deciding how much to borrow and know the actual amount will vary depending on their personal circumstances and between lenders.
This article was reviewed by our Consumer Editor Meagan Lawrence before it was updated, as part of our fact-checking process.
