The RBA raised rates in March 2026, taking the cash rate to 4.35%. Industry analysts have been modelling what a further rise to 4.85% would mean for Sydney's property market. The answer: painful but not catastrophic — and there are things you can do right now regardless of which way rates move.
What 4.85% Means for Monthly Repayments
The cash rate doesn't directly equal your mortgage rate. Variable home loan rates are typically cash rate + 1.8–2.4%. So a 4.85% cash rate translates to roughly 6.65–7.25% variable home loan rates — compared to today's 6.15–6.5% range.
| Loan Size | Today (6.2%) | At 4.85% Rate (6.85%) | Monthly Increase |
|---|---|---|---|
| $500,000 | $3,085/mo | $3,290/mo | +$205 |
| $700,000 | $4,319/mo | $4,606/mo | +$287 |
| $850,000 | $5,244/mo | $5,592/mo | +$348 |
| $1,000,000 | $6,170/mo | $6,579/mo | +$409 |
These increases are meaningful but not devastating for households already servicing at today's rates. The bigger concern is for households already stretched — for whom even $200–$300/month extra is genuinely difficult.
What Happens to Borrowing Power?
APRA requires lenders to assess borrowers at the current interest rate plus a 3% serviceability buffer. At a 4.85% cash rate scenario with typical variable rates of 6.85%, the assessment rate becomes approximately 9.85%. This significantly reduces how much you can borrow:
How the buffer works
At today's rates (6.2%), lenders assess you at ~9.2%. At 6.85%, they assess at ~9.85%. On a $150,000 household income, that gap reduces your borrowing capacity by approximately $40,000–$60,000.
What Would Happen to Sydney Property Prices?
This is the question everyone wants answered. Analysts model it differently, but the consensus is:
- Premium inner-city market (>$2M) — most sensitive to rate rises. Would likely see 5–8% softening as discretionary buyers pull back.
- Middle ring ($1M–$2M) — moderate impact. Supply still constrained, but affordability pressure limits buyer pool.
- Entry-level (<$1M) — most resilient due to structural undersupply and persistent first home buyer demand (scheme-backed). Likely flat to slight correction of 2–5%.
- SW Sydney growth corridor — relatively resilient. Infrastructure pipeline (Aerotropolis), strong migration-driven demand, and affordable entry prices underpin values.
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Should You Buy Now or Wait for Rates to Peak?
This question comes up in every rate cycle. Historical data from Sydney suggests that waiting for the rate "peak" has consistently underperformed buying through the cycle — because:
- You can't precisely time the peak. Once it's clear rates have peaked, prices have already started recovering.
- The months you spend renting while "waiting" have a cost — the median rent in SW Sydney has risen faster than the interest cost of buying through the cycle.
- Once rates start falling, demand surges rapidly and prices re-accelerate. The window of "best buying" is shorter than most people expect.
The honest answer: buy when you can comfortably afford the repayments at current rates — including the APRA buffer. Don't buy at the maximum of your capacity hoping rates will fall. That is the scenario that creates mortgage stress. Check your repayment calculation at today's rates and at 1–1.5% higher to stress-test your affordability before committing.
For Existing Homeowners: What to Do Now
If you're already on a variable rate and the cash rate rises further:
- Review your rate now — many existing borrowers are paying 6.4–6.8% while new customers can access 5.7–6.1%. Refinancing could save $300–$500/month regardless of what rates do next.
- Consider a fixed rate split — fixing 30–50% of your loan gives cash flow certainty on part of your repayments while retaining flexibility on the variable portion.
- Build your buffer — put extra repayments into your offset account now while you have capacity. Each $10,000 in offset saves ~$50–$60/month in interest at current rates.
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