The Cash Rate Is Now 4.60%. What This Year’s Fourth Rise Changes.

Through 2025, the working assumption in most household and business planning was that rates had peaked and would come down. That was reasonable at the time. It is no longer what is happening.

The Reserve Bank has now raised the cash rate four times in 2026. The target moved to 3.85% in February, 4.10% in March and 4.35% in May. It was held at 4.35% on 11 August, and rose to 4.60% on 29 September. In August the Board’s statement was direct about why: inflation “is still too high”, and it “is not expected to return to around the midpoint of the target range until late 2027 and there are upside risks to this projection”.

That was already a different picture from “rates are about to fall”. The September decision moves it further: the cash rate is above the peak assumed in August, the Board has said it will raise again if needed, and any fall is some way off.

The June quarter gave the Reserve Bank something, but not enough.

In August, the RBA’s assessment was that “headline inflation is now expected to have peaked in the June quarter 2026, and is forecast to return to the 2–3 per cent target range by early 2027”. Underlying inflation is the slower story: trimmed mean inflation is expected to remain above 3% until mid-2027.

By 29 September the Board said recent inflation outcomes “were stronger than expected”, with global energy prices much higher than it had assumed in August. The direction is right and the pace is not, which is why the Board moved again rather than holding.

There is a lag between a cash rate decision and the repayment that lands in someone’s account, and this year that lag is still unwinding.

Wages have not kept pace. The Wage Price Index rose 3.2% over the year to the June quarter 2026, against CPI of 3.5%. Real wages are going backwards, which is a reversal of the pattern through most of 2025.

The property market did not wait for the September meeting.

On Cotality’s home value index, national dwelling values fell a further 0.9% in August 2026, with Sydney down 1.4% and Melbourne 1.1%, leaving values 3.6% below the March peak. Capital city listings were 8% above the five-year average in the four weeks to 30 August.

For buyers, that is a genuinely different market from the one that existed in February. More stock, less competition, and vendors who have had to adjust expectations. For sellers, spring listings are entering a market with more supply and fewer bidders than the seasonal script assumes.

One regulatory change from earlier this year also affects borrowing capacity, separately from the rate moves.

Since February 2026, APRA has applied a hard limit: authorised deposit-taking institutions may write no more than 20% of new mortgage lending at a debt-to-income (DTI) ratio of 6 times or greater. The limit applies separately to owner-occupier and investor portfolios and is measured quarterly. Owner-occupier bridging loans are exempt, as is lending for the purchase or construction of new dwellings.

The serviceability buffer remains at 3 percentage points, confirmed by APRA in May 2026.

The practical effect for a borrower is that capacity is now constrained by two separate things: the buffer, which has always been there, and a portfolio-level cap that can change a lender’s appetite depending on where they sit against their own quarterly limit. A borrower declined at one lender on a DTI basis is not necessarily a borrower who cannot borrow. It may be a timing and lender-selection question, which is the sort of thing a broker can help work through.

Four things are worth reviewing after the 29 September decision.

• 1
  Check the rate you are actually paying, not the one you signed up for. Lenders pass on increases at different times and in different amounts. The gap between a repriced loan and an unrepriced one has widened this year.
• 2
  Test the budget against one more increase. The Board has said it will raise the cash rate further if needed. A household that works at 4.60% but not at 4.85% should know that now rather than in December.
• 3
  Reassess borrowing capacity before shopping, not after. With the DTI limit in place, capacity is lender-specific in a way it was not two years ago.
• 4
  If you are an investor, redo the numbers without the deduction for rental losses. Negative gearing on established residential property is being quarantined from 1 July 2027, and only established dwellings last acquired before 7.30pm AEST on 12 May 2026 keep the existing treatment, with the contract date counting for purchases under contract. Rate and tax settings have both moved, and an investment plan needs to reflect both.