What the RBA Decided

• The cash rate rose from 4.60% to 4.85%, a 25 basis point increase.
• The vote was split. Six board members voted to raise rates, and three voted to hold at 4.60%.
• It is the fifth hike in seven meetings this year, a total of 125 basis points since the start of 2026.

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Why the RBA Raised Rates

Inflation is higher than the RBA expected. Headline inflation rose to 4.3% in the year to September, up from 4.0% in August. Trimmed mean inflation, the RBA’s preferred measure of underlying inflation, rose to 3.6%, which means it has been above the 2% to 3% target range for 14 consecutive months.

The RBA’s statement points to several causes:

• Fuel prices. The conflict in the Middle East has broadened, and global energy prices are much higher than assumed in the RBA’s August forecasts.
• Technology goods. AI-related demand is pushing up global prices for technology products.
• Domestic pressure. Capacity constraints and business cost pressures continue, and companies are raising prices or planning to.

The RBA now expects inflation to stay above 3% for the coming year and not to return to the middle of the target range until mid-2028. The RBA’s central forecasts do not see a recession, though it expects growth to slow markedly and unemployment to rise.

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What It Means for Your Repayments

The 0.25 percentage point increase adds about $55 a month to a $500,000 mortgage, based on a 6.7% rate and 25 years remaining. That is about $658 a year, and roughly double on a $1 million loan. The major banks usually wait about 10 business days before passing a rate rise on to borrowers.

That is only the latest increase. Five hikes this year add up, and many households are already feeling it. Roy Morgan research shows more than 1.82 million borrowers could be in mortgage stress. 

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What It Means for Property Investors

Holding costs rise. As a rule of thumb, every 0.25 percentage points adds about $2,500 a year in interest for each $1 million of debt. For an investor with several properties, the shortfall between rent and costs grows with every hike. 

Borrowing capacity falls. Lenders assess you at a rate 3 percentage points above your actual loan rate. At a 6.7% loan rate, as in Finder’s example, you are assessed at 9.7%. Each hike reduces what you can borrow, and it can stop a second or third purchase. 

Prices are under pressure. The RBA’s statement says housing prices “have fallen significantly” and that higher rates and lower turnover are expected to weigh on growth. In September, realestate.com.au’s Home Price Index showed national prices 2.7% below their March 2026 peak, and further rate rises add to downward pressure.

Rents remain tight. Cotality’s Rental Review for the June quarter showed national rents up 5.9% over the year, with vacancy below 2.0% in every capital city. Higher rents support investor cash flow, though they add to pressure on renters. 

Tax settings add to the picture. For established residential properties bought after 12 May 2026, losses carry forward against future property income instead of offsetting your wages. That makes the cash flow shortfall more important.

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Is This the Last Hike?

Economists are split.

• Commonwealth Bank’s economics team expects this to be the last hike of the cycle, though it says risks remain skewed toward further tightening next year.
• Oxford Economics is not expecting further near-term hikes, but says risk is firmly skewed toward more tightening if oil stays above $100 a barrel beyond the first quarter of 2027.
• Betashares says its base case is at least one more hike, and that two more in the first half of next year cannot be ruled out.

The RBA has one more meeting this year, in December, and then meets again in February. Nobody can say where rates will go, which is why it helps to plan for a range of outcomes instead of one forecast.

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What to Do Now

1. Check your buffer. Three to six months of repayments across all your properties is a common starting point.
2. Stress-test your numbers. Check what happens if rates rise another 1% and if a property sits vacant for eight weeks.
3. Review your loan. Ask your broker whether your rate is competitive and whether an offset account or a different structure would help.
4. If you are buying, get a formal assessment. Online calculators do not reflect the current buffer.
5. Avoid decisions made in a panic. Selling in a falling market locks in the loss, and buying without a buffer adds risk.
6. Focus on fundamentals. Strong rental demand and constrained supply matter more than any single rate decision.

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Ready to Plan Around Higher Rates?

At Search Property, we help Australians cut through the noise and build data-driven investment strategies aligned with long-term wealth goals. Our buyers agents have helped thousands of clients build wealth through property because we focus on fundamentals, not headlines.

Book a FREE investment assessment with Search Property.