Property market on edge as RBA delivers its latest call

The move has taken the cash rate to an 18-year high, the highest setting the nation has seen since 2008.

The RBA’s decision followed higher inflation results, with the consumer price index (CPI) rising 4.3 per cent in the 12 months to September 2026, up from 4.0 per cent in the 12 months to August.

Ahead of the meeting, following inflation figures, all the big four banks updated their prediction, forecasting a fifth rate hike.

REA Group senior economist Angus Moore said the RBA’s decision was expected, as the central bank remained unconvinced inflation would return sustainably to target without further tightening despite a slowing economy and easing labour market.

“The RBA remains focused on too-high inflation, and the current housing slowdown is one of the channels through which tighter monetary policy is working to reduce household spending and demand,” Moore said.

“In the near-term, higher mortgage rates and very challenging housing affordability will continue to weigh on home prices; over the longer term, structural undersupply of housing remains a long-term support for prices.”

He said the rate hike would deepen the property downturn, with further mortgage rate increases squeezing borrowing capacity and pushing dwelling prices lower.

“However, the downturn, while brisk, remains an orderly adjustment driven by rising rates and affordability pressures, rather than a distressed housing correction.”

He said the market remained relatively stable, with low mortgage arrears, limited negative equity and many households holding substantial buffers to manage repayments.

According to Finni principal and mortgage broker Eva Loisance, the latest rate hike could hit buyer confidence harder than affordability.

“Consumers are already grappling with cost-of-living pressures and elevated mortgage repayments. Another increase risks reinforcing the perception that further pain is still ahead,” Loisance told REB/ SPI.

“My concern is that a further rate hike risks deepening the negative sentiment already evident in the market.”

She said fragile market sentiment was making buyers increasingly cautious and prolonging purchasing decisions, even as supply and demand remained key market drivers.

Loisance said higher interest costs were squeezing investor cash flow, with weak rental growth in some markets making it harder to justify expanding portfolios despite strong rental demand.

“Higher interest costs continue to erode cash flow, and some investors are questioning whether the risk-adjusted returns justify expanding their portfolios in the current environment.”

For first home buyers, she said that another rate rise could be the tipping point that pushes home ownership further out of reach.

“Borrowing capacity has already been significantly reduced over the past tightening cycle, and many aspiring buyers are finding that rising living costs are affecting their ability to save a deposit and service a loan at today’s assessment rates.”

She said weakening confidence could extend beyond property, prompting more buyers to delay purchases, reducing transaction volumes and further slowing housing activity in an economy heavily reliant on consumer spending.

“The reality is that higher interest rates don’t solve Australia’s inflation problem.

“What they do is reduce borrowing capacity, delay purchasing decisions and place additional pressure on households that are already feeling the strain,” Loisance said.