First Home Buyers Face $11,200 Borrowing Hit as RBA Hikes Rates to 15-Year High

The Reserve Bank of Australia is poised to raise the cash rate by 0.25 percentage points to 4.60% on Tuesday, its highest level since 2011. First home buyers earning the average full-time wage of $108,650 will lose $11,200 in borrowing capacity, bringing their total 2026 reduction to $47,400, or 9 per cent. Existing borrowers on a $700,000 loan will pay an extra $107 monthly, with cumulative increases this year reaching $424.

How much less can first home buyers borrow

A single buyer on Australia’s average full-time wage of $108,650 will see maximum borrowing capacity fall by $11,200 after Tuesday’s rate rise, according to Canstar analysis. For a couple each earning the same amount, the reduction doubles to $22,400. Since January 2026, first home buyers have lost $47,400 in borrowing power, a 9 per cent cut. These estimates assume a 30-year loan at average variable rates, with no other debts, no dependants, and minimal expenses. Actual capacity varies between lenders and individual circumstances.

Which states are hit hardest

South Australia faces the mainland’s toughest squeeze, with the lowest average wage at $102,732 and borrowers already carrying the largest mortgages. Average new owner-occupier loans in South Australia surged 68 per cent from $401,000 in June 2021 to $672,000 in June 2026. Western Australia and Queensland followed with 67 per cent and 63 per cent increases respectively. Tasmania will wear the biggest national hit, with the lowest average wage at $96,271. Sally Tindall, Canstar’s data insights director, told SBS News that another rate hike would mean yet another haircut to the maximum amount someone can borrow.

What existing borrowers will pay each month

Monthly repayments on a $700,000 variable mortgage will rise by roughly $107 after Tuesday’s hike, bringing the cumulative 2026 increase to $424 per month. For a $1 million loan, monthly repayments jump by $152, with total increases this year reaching $606. A $600,000 variable mortgage with 25 years remaining will see repayments climb by about $95 monthly. According to broker analysis, first-time homebuyers and anyone who bought in the last 12 to 18 months at the absolute limit of their borrowing capacity will bear the brunt of this, simply because they have the least financial cushion.

Why the RBA is raising rates again

The RBA targets persistent high inflation, currently at 3.5 per cent headline and 3.6 per cent trimmed mean, well above its 2 to 3 per cent target. Fuel costs, housing construction, and dining out expenses are the main inflation drivers. The Middle East conflict has pushed Brent crude oil to multi-month highs. Domestic demand, GDP growth, and employment have proven far more resilient than expected, while productivity remains sluggish. All four major banks and 37 of 41 economists surveyed by Finder, or 90 per cent, expect a 25 basis point increase on Tuesday.

Final Thoughts

First home buyers face a brutal squeeze: borrowing capacity shrinks while monthly repayments climb. With cumulative 2026 losses now at $47,400 and Tuesday’s hike likely to follow, entry-level buyers must reassess affordability across all ownership costs, not just purchase price.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.