For many Australians dreaming of their first home, the news just got worse. The Reserve Bank of Australia (RBA) raised interest rates again, leaving potential homebuyers wondering if they’ll ever be able to afford a property. The latest rate hike is a fresh blow to people already struggling with high prices and limited borrowing power.
The Impact of the Latest Rate Rise
On Tuesday, the RBA raised the official cash rate by 25 basis points, bringing it to 3.85%. This is the same level it was at in July 2025, and all four major banks followed suit, raising their variable rates for both new and existing customers. As a result, many homebuyers are facing tighter borrowing limits. According to Canstar, the latest rate rise could reduce the amount Australians can borrow by as much as $12,000.
The increase has come at a particularly tough time, with the property market already stretched thin. For many would-be homebuyers, this change could push them out of the market entirely, as it reduces the maximum loan they are eligible for. Even for those who’ve managed to secure pre-approvals, this extra $12,000 cut might mean the difference between being able to buy a home and being forced to wait even longer.
Why Are Rates Going Up?
The RBA’s rate hikes are driven by the ongoing problem of inflation, which is currently sitting at 3.8%—well above the RBA’s target of 2-3%. The RBA is hoping to slow down inflation by making borrowing more expensive, thus reducing consumer spending and slowing the economy. But, as we’ve seen, that comes with a cost. For homebuyers, the cost is higher interest rates, which in turn increases monthly repayments and decreases borrowing capacity.
The Commonwealth Bank (CBA) is already forecasting another rate rise in May, which will only make things tougher for those already feeling the pinch, reports Yahoo Finance. With NAB agreeing with this outlook and other banks like Westpac and ANZ acknowledging the possibility, it’s clear that further rate hikes are on the horizon. For homebuyers, this means rising costs not only now but potentially for the foreseeable future.
The Market’s Resilience: Will Prices Fall?
Despite these rate hikes, property prices have remained relatively resilient, even though the general assumption would be that higher rates would cool the market. Sally Tindall, from Canstar, suggests that property prices are unlikely to take a major hit because of the ongoing shortage of stock. There’s still an imbalance between supply and demand, which keeps prices steady.
However, she does suggest that property growth could slow down. For first-time buyers, this could mean that while they might not see a dramatic crash in prices, it will still be harder to save enough for a deposit, and the dream of homeownership might seem even further out of reach.
What Can Homebuyers Do?
With higher interest rates now a part of the landscape, homebuyers should act quickly if they want to lock in current rates before the next hike. It’s also important to stress-test budgets—homebuyers need to make sure they can still afford mortgage repayments if rates rise even higher. If you’re currently shopping for a home with a pre-approval, now might be the time to double-check that your loan amount will still get you the house you want.
For many Australians, the goal of homeownership feels increasingly elusive, especially as rate hikes continue to shrink what they can afford. The real challenge lies ahead: can the property market stay stable in the face of higher rates, or will even more people be pushed out of the market entirely?
