The RBA cut rates three times through 2025. Then it reversed... lifting the cash rate again in February, March, and again in May 2026. In the space of a few months, the cuts from last year were effectively unwound.
Here's the part that doesn't make the headlines. Lenders don't assess your loan at today's rate. Under APRA's rules, they have to add a 3% buffer on top - so a borrower is being tested at roughly 9% or more, not the rate they'll actually pay. When the cash rate rises, that assessment rate rises with it, and your borrowing capacity falls.
The cumulative effect of this year's rises is real: depending on your income and situation, borrowing capacity has dropped somewhere in the range of 6-8%. For a dual-income household, that can be tens of thousands of dollars in buying power .. gone, without you spending a cent.
There's also a third change that almost nobody is talking about. From February 2026, APRA introduced a debt-to-income limit: banks can now write only a small share of new loans to people borrowing six times their income or more. It's a guardrail, not a wall.
However, it means the lender you choose and how your loan is structured now matters more than it did a year ago.
A 5% deposit gets you eligible. It doesn't get you ready.
This is the gap.
The scheme tells you the minimum deposit. It says nothing about whether you can actually borrow enough, with the right lender, in a structure that still leaves you breathing room once you've moved in.
We've always said it plainly: borrowing capacity isn't the same thing as lifestyle comfort. The bank's maximum is a ceiling, not a target. And right now, with capacity tightening and a deposit door wide open, it's surprisingly easy to qualify for less than you assumed - or to stretch to the very top of what a single lender will allow, only to find the structure leaves you with no buffer at all.
None of this is a reason to wait for a "perfect" rate. Trying to time the next RBA move is guesswork, and guesswork is exactly what gets buyers into trouble. The buyers doing well in this market aren't the ones who picked the bottom. They're the ones who got their structure right first: cleaned up small debts, understood their real number across different lenders, and built in a buffer before they fell in love with a listing.
The real takeaway here
A bigger scheme and a smaller borrowing limit have arrived at the same moment. One is being shouted from the rooftops. The other is barely whispered. If you only hear the first, you can walk into the market with the wrong picture of what's actually possible (and what's actually wise).
Preparation still beats pre-approval. It just matters more this year than last.
If you're weighing up the 5% scheme for your first home, your next move or your loved ones, it's worth modelling your real position - across lenders, with a proper buffer - before you start inspecting. This is exactly the kind of thing worth getting clarity on early. As always, we are happy to walk you through it.
My Mortgage Concierge is licensed under ACL 392736 Sattout Accounting Services Pty Ltd. General information only - seek personal advice before acting.
