If your borrowing capacity feels smaller than it did last year, you're not imagining it.
The RBA raised the cash rate three times in 2026, in February, March and May, taking it back to 4.35 percent. It's held there through June and July while the board watches inflation, which is still running around 4 percent.
Nobody sends you a letter when your borrowing power drops. It just quietly happens.
The mechanics
Lenders assess you at the actual rate plus a serviceability buffer. Every rate rise pushes that assessment rate up, and your maximum loan down.
As a rough rule, each 0.25 percent rise trims borrowing capacity by around 2 to 3 percent. Stack three rises on top of the 2025 position and many buyers are down somewhere in the range of 7 to 9 percent on what a lender will give them.
On a budget that was $900k, that can be $60k to $80k gone. Enough to change which suburbs you're shopping in.
The strange silver lining
Here's what most buyers miss. Everyone's capacity shrank at the same time.
That's a big part of why Sydney and Melbourne values are now falling and why auction clearance rates are running below average. Less borrowing power across the whole market means less competition at every price point.
So while you can borrow less, the properties are coming to meet you. In the soft markets, the trade is roughly neutral. In the markets still rising, like Perth and Brisbane, it's a squeeze.
What happens next
Economists are genuinely split. Finder's latest survey has just over half expecting at least one more hike in 2026, with August the most likely candidate, while CBA, NAB and ANZ expect the RBA to hold from here.
Which means planning your purchase around a rate prediction is gambling. Plan around your actual serviceability with a buffer, and buy well within it.
Know your real number first
Two practical steps. First, find out what you can actually borrow at today's rates, not last year's. Our borrowing power calculator gives you the picture in a couple of minutes, and our deeper walkthrough covers exactly what's eating your capacity beyond the rate.
Second, once you know your ceiling, make every dollar of it count. In a market where your budget just shrank, overpaying by 3 percent hurts twice as much. Converta matches you with a vetted buyer's agent who knows what things actually sell for in your target market. Free, no obligation, first call within 24 hours.
Sources: RBA, Finder RBA Cash Rate Survey, July 2026.