Two Rate Hikes in Two Months: What Australian Borrowers Need to Know Now

If you've been thinking about buying a home, refinancing, or getting into property investment in 2026, chances are you're feeling a little uneasy. And honestly? That feeling is telling you something real.

The Australian Property Institute's Property Market Outlook Index just dropped to 6.1 in Q2 2026, down from 7.1 in Q1. That's the sharpest single-quarter fall we've seen across every major state and every key asset class. The culprit? The Reserve Bank of Australia's back-to-back cash rate increases in February and March this year.

This isn't just a headline. For anyone sitting on a loan, planning to borrow, or hoping to buy in the next six to twelve months, this matters.

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The Rate Hikes Have Changed the Game

For the past few years, the big story in property has been supply. Not enough homes. Not enough listings. Buyers are chasing too few properties.

That's still true. But according to API Chief Economist Dr Sherman Chan, the interest rate outlook has now overtaken supply constraints as the biggest drag on market confidence. And when rates rise twice in two months, lenders recalculate what they're willing to lend, and borrowers feel it immediately.

Here's the simple truth: higher rates mean lower borrowing capacity. If you were pre-approved six months ago, that number may no longer be what a lender will offer you today. This is something we're talking to clients about every single week at ASK Financials.

The Market Is Still Moving, Just Not Evenly

Here's something that often gets lost in the doom and gloom. Even as confidence falls, the market hasn't stopped. It's just become more uneven.

Western Australia is still Australia's strongest market with an index score of 7.8. Queensland follows at 7.3, and South Australia at 6.7. Meanwhile, New South Wales (5.2) and Victoria (5.5) are edging toward neutral territory, with Melbourne in particular feeling the pressure of both rate hikes and softening consumer confidence.

Residential property took the sharpest single-quarter confidence decline of any asset class, falling from 7.2 to 6.2. But, and this is important, it's still the second-strongest performing sector overall. Why? Because the housing supply crisis hasn't gone anywhere.

The population is still growing. New stock is still not keeping up. And the federal government's 5% Deposit Scheme continues to bring first-home buyers into the market, pushing up competition, particularly at the entry-level end.

ASK Financials is here to help you navigate this market with confidence and get into the right property at the right time, with the right loan behind you. If you'd like personalized advice based on your actual situation, we'd love to have a conversation. Feel free to call us on 0433 944 055, or book a free consultation today, no obligation, just clarity. Follow us on Instagram for quick market tips and mortgage updates. Subscribe to our insights on LinkedIn for deeper dives like this one.