NAB Calls the Rate Peak: June 2026 Outlook

NAB has become the third of Australia's four major banks to declare the rate hiking cycle over, scrapping its forecast for a further rate increase in August 2026 and now predicting the next move in the cash rate will be a cut. For first home buyers who have watched their borrowing capacity shrink through three consecutive increases this year, this shift in the outlook carries real implications for timing, strategy, and what to expect from the property market over the next 12 to 18 months.

What NAB changed and why

NAB chief economist Dr Sally Auld said the economic backdrop has shifted materially since the bank's earlier forecasts. Australia's March quarter GDP grew just 0.3 per cent, down sharply from 0.9 per cent in the December quarter, signalling that the three rate increases delivered in February, March, and May 2026 are flowing through to the broader economy. The April monthly CPI indicator fell from 4.6 per cent to 4.2 per cent, offering early evidence that inflation is heading in the right direction.

NAB now expects the cash rate to remain at 4.35 per cent through the rest of 2026 and into early 2027, with cuts beginning in the second quarter of 2027. The bank forecasts the cash rate will reach 3.6 per cent by the end of 2027 - essentially reversing most of this year's increases. Dr Auld noted that while NAB has greater conviction that the next move is down, the timing remains uncertain and dependent on incoming data.

The April unemployment reading of 4.5 per cent - the highest since November 2021 - also contributed to the reassessment. Combined with employment falling by 19,000 in April and GDP growth running well below trend, the bank concluded that further tightening posed more risk than reward to the economy.

Where Australia's four major banks now stand

The big four have rarely been this aligned. Three now say the hiking cycle is over. One remains unconvinced:

• NAB: Rate peak reached at 4.35 per cent. August hike forecast scrapped. Next move down. First cut expected Q2 2027, cash rate to reach 3.6 per cent by end of 2027.
• CBA: No further hikes expected. Rate cuts likely to begin in 2027. Expect Sydney and Melbourne prices to ease before rebounding in 2027.
• ANZ: No further hikes expected. Forecasts Sydney prices to fall 0.7 per cent for full year 2026 and Melbourne to ease 1.7 per cent.
• Westpac: Still forecasting at least one further rate hike. Expects the cash rate to rise beyond 4.35 per cent before the end of the cycle, though the rest of the market has moved against this view.

The June 16 RBA meeting will be the first significant test of these forecasts. Market pricing and most economists expect a hold, and the April CPI data supports that outcome. What happens beyond June depends heavily on whether inflation continues to ease and whether the labour market holds steady.

What a rate peak means for your borrowing power

Three consecutive 25-basis-point increases have reduced what a single-income buyer on average wages can borrow by approximately $36,000 compared to January 2026. For a dual-income couple, the reduction is closer to $72,000. These are real constraints that have pushed some buyers outside their target price range entirely.

If NAB, CBA, and ANZ are right and the next move is a cut rather than a hike, that borrowing capacity starts to recover from 2027 onward. Each 0.25 percentage point cut restores roughly $12,000 to $18,000 in borrowing capacity for a single buyer at average wages, depending on loan term and individual financial position. Two cuts would restore the equivalent of one of this year's hikes.

The important caveat is that property prices typically respond to rate cuts faster than most buyers expect. Historically, the Australian market has rebounded sharply in the 6 to 12 months after a cutting cycle begins, as confidence returns and competition rises. Buyers who wait for cuts to arrive may find that reduced repayments are partly offset by higher entry prices.

What this means for first home buyers right now

Whether you are actively looking or still saving, the change in the rate outlook shifts the calculus in several ways:

• The current window of softer competition may not last long. Sydney and Melbourne prices are easing, auction clearance rates have been below 60 per cent for most of 2026, and vendor discounting is running at around 3.1 per cent nationally. If rate cuts arrive in 2027 as three banks now forecast, this buyer-friendly environment could change within 12 to 18 months.
• Lenders still stress-test at over 7 per cent. Even if rates have peaked, the standard serviceability buffer adds 3 percentage points above your actual rate. At 4.35 per cent, your test rate is above 7.35 per cent. Understanding your real borrowing ceiling before committing to a purchase is essential.
• Government schemes are available regardless of rate direction. The Australian Government 5 per cent Deposit Scheme now has no income cap and unlimited places. Help to Buy is open in every state. The Queensland $30,000 first home grant is available until 30 June for contracts signed on new homes under $750,000. These stack on top of any future rate relief.
• A mortgage broker or lender can model your specific situation. Rate forecasts have changed significantly across 2026 and will continue to evolve as data comes in. A professional can help you understand how different rate scenarios affect your repayments, borrowing ceiling, and overall plan.

Run the numbers

Use these tools to understand how the current rate environment and possible future cuts affect your position:

• Interest Rate Shock Tester - model your repayments under the current 4.35 per cent cash rate and potential cuts back toward 3.6 per cent to see how your monthly commitment could change
• Borrowing Power Calculator - see how your maximum loan size changes as rates shift, and plan your target price range around realistic borrowing capacity at today's rates
• Grant Stacker - check which federal and state grants you may be eligible for, including the schemes that are available now regardless of where rates end up