Borrowers are bracing for steeper costs as the Reserve Bank of Australia's (RBA) May meeting on monetary policy convenes. If the nation's central bank does lift the cash rate to 4.35%, it will be the third consecutive rise this year.
According to Canstar, for an owner‑occupier with a $600,000 mortgage and 25 years remaining, the May increase would add $91 to monthly repayments, bringing the total rise across the three hikes to $272. Larger loans face even sharper jumps, with $1 million debts adding $453 a month.
The rate hike would unwind last year’s cuts, pushing the average owner‑occupier variable rate to 6.26%, a level not seen since January 2025. While more than 40 lenders are expected to keep at least one variable rate below 6%, the lowest offers are likely to sit around 5.75%.
Beyond repayments, borrowing limits are also tightening. Canstar analysis shows someone on the average full‑time wage of $106,950 will lose about $11,700 in borrowing capacity if the May hike proceeds. Couples on two average wages would see a $23,500 reduction.
“The rate hikes in February and March have taken a serious bite out of the home buying budgets for those borrowing at capacity and there could be more pain to come as early as Tuesday,” Sally Tindall, Canstar’s data insights director, said.
Since February, borrowing capacity has already fallen by $36,500 for individuals and $73,100 for couples. Westpac economists expect two further rises in June and August, which would cut an average borrower’s budget by nearly $59,000 — around 10% since the start of the year.
Meanwhile, property prices are reacting unevenly to the tightening cycle. Sydney and Melbourne have already recorded declines of 0.7% and 1.7% this year, matching ANZ’s full‑year forecasts. In contrast, Brisbane values are up 6.4% and Perth has surged 9.2%, with both cities tipped for double‑digit growth in 2026.
“The housing market hasn’t reacted evenly to the rate hikes,” Tindall said. “In Sydney, prices might have cooled but the rate hikes have pushed many home buying budgets down by more. By contrast, Brisbane and Perth are still powering ahead on the back of a lack of supply.”
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