RBA's Two 2026 Rate Rises Hit Borrowing Power

After a year of rate cuts through late 2025, the RBA surprised plenty of borrowers by lifting the cash rate on 3 February 2026 and again on 17 March 2026. The cash rate now sits at 4.10%, and money markets are pricing in the possibility of further moves later in the year. For first home buyers who spent 2025 hearing that "rates will keep falling and your borrowing power will come back", the script has flipped. Here is what the back to back rises actually mean for repayments, for how much a bank will lend you, and for the practical decisions you can make about it this month.

What the rises look like in repayment dollars

Variable home loan rates have moved roughly in step with the cash rate. Our reference variable rate now sits at 7.20% compared to lows near 5.60% through 2025. On a 30 year loan, that difference looks like this:

• $500,000 loan at 5.60%: approximately $2,870 per month.
• $500,000 loan at 7.20%: approximately $3,310 per month.
• Difference: about $440 per month, or roughly $5,280 per year, on the same loan balance.

A useful rule of thumb for first home buyers is that every 0.25% rate rise on a 30 year loan adds about $17 per month for every $100,000 of loan balance. For a $400,000 loan that is around $68 per month for each 0.25% move. For an $800,000 loan it is closer to $135 per month. Two back to back rises feel small on the news, and material in your account.

The bigger story: how the rises change your borrowing power

Banks do not assess your loan at the rate you actually pay. APRA requires lenders to test serviceability at your real rate plus a 3% serviceability buffer. With the reference variable rate at 7.20%, that means lenders are currently testing first home buyer applications at around 10.20%. Compared with the assessment rate through much of 2025, the bar is meaningfully higher.

For a single applicant earning $90,000 gross, with no other debts and a baseline household expense allowance, the borrowing capacity outcome looks roughly like this:

• 2025 lower rate environment: assessable borrowing power in the order of $500,000 to $520,000.
• Today's environment (10.20% test rate): assessable borrowing power closer to $460,000 to $480,000.
• Practical impact: roughly a $40,000 reduction in purchasing power on the same income.

These are illustrative figures, not a quote. Your actual borrowing capacity depends on your living expenses, dependants, credit cards, student debts and lender policy. Plug your real numbers into the Borrowing Power Calculator to see where you sit today versus where you sat at the start of the year.

Why first home buyer schemes help cushion the rate shock

There is a useful flip side here for first home buyers specifically. Every government scheme that reduces the size of the loan you need to write also reduces the dollar impact of every future rate rise. A smaller loan balance means smaller monthly repayments and smaller swings when rates move.

• Help to Buy contributes up to 30% to 40% of the property price as a government equity stake, so a $700,000 property might mean a loan closer to $420,000 instead of $665,000.
• First Home Guarantee lets you buy with a 5% deposit without paying LMI, which keeps more cash on the side for future rate buffers.
• State grants and stamp duty concessions reduce upfront costs, which often means borrowing less rather than paying more out of pocket.

On the same $500k vs $420k example, a 0.25% rate move costs you about $85 per month at $500,000 but only $71 per month at $420,000. Across a decade of rate movements, those differences compound. Compare the schemes side by side in the Scheme Comparison Tool to see which ones materially shrink the loan you need to write.

Should you lock in a fixed rate right now?

It is the most common question after every RBA decision and there is no universally correct answer. A few things are worth keeping in mind:

• Fixed rates already include market expectations. If economists and money markets expect another cash rate rise this year, the fixed rates a lender quotes you today usually reflect that. Locking in is not a free upgrade.
• Fixed loans are less flexible. Extra repayments are often capped, offset accounts may not be available, and break costs can be significant if you sell or refinance early.
• Split loans are a middle ground. Splitting between fixed and variable can give you partial protection and partial flexibility, which suits buyers who genuinely cannot absorb another 0.50% move on their full balance.

A good lender or mortgage broker can model these splits properly for your specific income and balance. Brokers serve an important role for first home buyers in this market and we will always suggest you talk to one if you are unsure. The tools on this site are designed to make those conversations more productive, not to replace them.

What this means for you

If you were preparing to buy in 2026, the rate moves do not change whether buying is the right decision for you. They do change the numbers. The practical steps for first home buyers right now:

• Re-run your borrowing capacity at the new assessment rate and update your maximum property budget accordingly.
• Stress test the repayments at 0.25%, 0.50% and 1.00% higher than the current rate. If a further rise would push you above what you can honestly absorb, build a bigger cash buffer before you sign anything.
• Look at government schemes that reduce your loan size rather than only schemes that help with deposit. A smaller loan is the most durable form of rate protection.
• If you are already pre approved at last year's assessment rate, ask your lender to refresh the assessment before contract date. The number you were quoted in 2025 may no longer hold today.

Run the numbers

Use these tools to see how the 2026 rate environment changes your position:

• Borrowing Power Calculator - test your real income at the current 10.20% assessment rate and see what is borrowable today.
• Interest Rate Shock Tester - model the dollar impact of one more 0.25%, 0.50% or 1.00% rise on your loan balance.
• Scheme Comparison Tool - compare Help to Buy, the First Home Guarantee and state schemes to find the option that shrinks your loan the most.
• Mortgage Offset Calculator - see how parking your savings in an offset account quietly reduces the interest you pay every month a higher rate sits on your loan.