Australia’s latest move on interest rates has given fresh urgency to warnings from the Finance Brokers Association of Australia (FBAA) about a looming “perfect storm” for borrowers and renters.
The Reserve Bank has lifted the cash rate 25 basis points to 4.35%, its third hike of 2026, after inflation surprised to the upside. The board said “Inflation picked up materially in the second half of 2025, and information since the beginning of this year confirms that some of this increase reflected greater capacity pressures,” adding that “It was therefore judged appropriate to increase the cash rate target.”
After emphasising the inflation threat, the board’s decision lands on mortgage holders already stretched by higher mortgage rates and rising living costs, just as the federal government considers changes to capital gains tax and negative gearing.
FBAA interim CEO Peter White said the combination of tighter monetary policy and possible tax changes risks being “a toxic mix of pain and devastation.”
He argued that curbing investor activity while lifting the cash rate will inevitably feed through to housing costs.
“Surely driving investors out of the market while at the same time increasing interest rates can only result in increased mortgage repayments and higher rental prices,” White said.
The association has previously warned that cost‑of‑living pressures linked to the Middle East conflict could push more borrowers towards default. Recent Finder research cited by FBAA suggests nearly one in ten mortgage holders could fall into arrears if there are one or two further rate hikes, a risk that looms larger after the latest decision.
At the same time, FBAA has urged the government not to proceed with changes to capital gains tax and negative gearing, arguing they would deter property investors and worsen an already tight rental market.
“These tax changes won’t lead to any positive effect but will mean that someone renting with the aim of buying a home won’t be able to save a deposit as easily, while many who are renting because they are already doing it tough will struggle to meet the increased repayments,” White said.
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