Australian home buyers face a tighter borrowing environment after the Reserve Bank of Australia raised the cash rate to 4.60% on 29 September 2026. The increase comes as auction clearance rates and home values have softened, while higher Mortgage repayments and reduced borrowing capacity continue to shape housing affordability.

Auction results soften before the RBA meets

Trade press reports of preliminary Cotality data put the combined Capital city clearance rate at 50.3 per cent, a 10-week low. Broker News reported 1,428 auctions, down 22.4 per cent on the previous week. Sydney recorded 53.6 per cent from 790 auctions, Melbourne 48.8 per cent, Brisbane 42.6 per cent and Adelaide 39.3 per cent.

Values were already easing

The broader Cotality Home Value index shows a market that was cooling well before the latest auctions. Its September report, published on 1 September, said national values fell 0.9 per cent in August, the fifth consecutive monthly decline, leaving them 3.6 per cent below the March 2026 peak. Sydney fell 1.4 per cent in the month.

Cotality also found that 93 per cent of capital city suburbs recorded value falls, while capital city listings were 24 per cent higher than a year earlier. Research director Tim Lawless described the change as a shift from an easing concentrated in higher-value segments to a "much more generalised softening".

What higher rates mean for repayments and borrowing

Canstar's Sally Tindall estimated that a 25 basis point rise would add about $91 a month to repayments on a typical $600,000 mortgage. Actual changes depend on each lender's pass-through, the Loan balance and its remaining term.

Borrowing power is also affected. In a Domain article published on 28 September, Canstar calculated that a single 0.25 percentage point rise would cut the borrowing capacity of an average full-time earner by about $11,200, and that the four rises expected this year would remove roughly $47,400. That assumes a $108,650 income, a 30-year owner-occupier loan and no other debts, and results vary between lenders.

Domain's chief residential economist, Nicola Powell, said that each increase in interest rates reduces the amount buyers can borrow. realestate.com.au's Eleanor Creagh was quoted as saying a further rise would put more pressure on household budgets.

Risks and what to watch

Forecasts are not outcomes. Canstar's Ms Tindall referred to a Westpac forecast of a 10 per cent fall in Sydney prices this year and to ANZ's forecast of a fifth rise. Both are projections by banks, and the Domain article also notes that a lower price can offset a smaller borrowing budget for some buyers.

Lower borrowing capacity, more listings and softer auction results do not by themselves prove prices will keep falling. Wages, employment and lending standards will also matter.

RBA Raises Cash Rate to 4.60%

The RBA increased the cash rate target by 25 basis points to 4.60% on 29 September 2026. For mortgage holders, the effect on repayments depends on each lender’s pricing decisions, the outstanding loan balance and the remaining loan term.