RBA CASH RATE AT HIGHEST LEVEL SINCE 2008
Tuesday 3 November was both Melbourne Cup Day and RBA decision day, with attention firmly focused on the prospect of another increase in interest rates. Following the higher-than-expected inflation result of 4.3% in the 12 months to September, markets had priced in an 85% probability of a rate rise. The RBA went ahead with the hike, voting 6–3 to lift the cash rate by 25 basis points to 4.85%, its highest level since 2008.
GREATER RATE EXPOSURE AND HEAVIER REPAYMENTS THAN IN 2008
Australia has become more exposed to movements in the cash rate over time. Around three-quarters of outstanding mortgages were variable at the time of the GFC, according to the RBA, compared with an estimated nine in ten or more today. The pandemic briefly interrupted that pattern as the cash rate hit an all-time low, with the fixed-rate share approaching 40% in early 2022, but most of those loans have since expired and borrowers have largely returned to variable rates.
At the time of writing, the major banks are advertising variable rates of 6.3% to 7.8%, depending on the product. Official RBA data puts the discounted variable owner-occupier rate at 6.8% in September 2026. Because this series runs back to the early 2000s, we can estimate what homeowners were paying on a typical mortgage in late 2008, the last time the cash rate was above today’s 4.85%. So how do housing costs compare?
Note: The analysis assumes an owner occupier purchases a dwelling of median value in November 2008 and September 2026. We have used a 20% deposit, assuming a 30-year principal-and-interest loan. We used the same bank discounted variable-rate benchmark for both dates: 7.09% in November 2008 and 6.80% in September 2026. This provides a consistent comparison, rather than the exact rate every borrower would pay.
Despite a higher average mortgage rate in November 2008, homeowners today are paying far more each month in mortgage repayments, reflecting the significant increase in house prices and, consequently, loan sizes. Owner occupiers in Sydney have seen the greatest increase in mortgage repayments, a difference of almost $4,000 per month, as average house prices have climbed by almost 180%. Sydney buyers will also need an extra $153,000 for their deposit, highlighting one of the greatest barriers facing first home buyers. In Darwin, monthly mortgage costs have increased by a far lesser amount, from around $2,100 eighteen years ago to $3,300 in September 2026.
Average incomes have not kept pace with house price growth. According to Oxford Economics, households spent an average of 45% of their income on mortgage repayments in Q1 2026, up from 33% in Q4 2008. Recent price falls have trimmed the average repayment by around $100 per month relative to the market peak (Australia average), with larger reductions for buyers entering Brisbane, Perth and Sydney, where prices have fallen further. Even so, average repayments across Australia in September were almost 12% higher than a year earlier.
PEAK AND PAUSE? WHAT HIGHER RATES MEAN FOR THE MARKET
With the cash rate at 4.85% and the majority of mortgage holders on variable rates, borrowers feel each increase almost immediately. Higher servicing costs reduce how much buyers can borrow, which weighs on demand and puts downward pressure on prices. With repayments still elevated, prices would need to fall further before mortgage affordability improves materially.
The impact is felt beyond buyers and across the housing market. Higher rates deter investors and increase financing costs for developers, which can delay new projects. That slows the supply of new homes and could keep rental markets tight, even as demand for homes to buy softens.
The key question is whether this is the peak in rates. Westpac and Oxford Economics both expect further tightening in the near term to be unlikely. A pause would give borrowers greater certainty and could help steady buyer confidence as the year closes out. Until then, higher mortgage costs will continue to shape who can buy, how much they can pay, and how quickly new homes reach the market.