REIQ: Households will hurt from highest interest rate in 15 years

The Real Estate Institute of Queensland (REIQ) says the Reserve Bank of Australia's (RBA) highly anticipated move to increase the cash rate by 25 basis points will further reduce borrowing power, increase mortgage costs and risk slowing investment in supply.

REIQ CEO Antonia Mercorella said today’s decision marks the fourth rate hike this year and takes the cash rate to 4.60 per cent, its highest level in fifteen years (since October 2011 when it was 4.75 per cent).

“Today’s decision takes the cash rate to 4.60 per cent, pushing borrowing costs beyond the previous post-pandemic peak of 4.35 per cent,” Ms Mercorella said.

“What many Australians are increasingly questioning is whether they are being asked to bear an unfair share of the burden in the fight against inflation.

“People understand that inflation needs to be brought under control and that the RBA only has a limited number of levers it can pull.

“However, rising costs are not the result of everyone living large or luxuriously. For many, a significant share of household income goes towards essential expenses such as housing, fuel, insurance, groceries and utilities that can’t simply be reigned in.

“There is a growing perceived unfairness around borrowers ‘being punished twice’. First through higher prices, and then through higher interest rates designed to bring those prices under control.

“It can feel counterintuitive that interest rates rise in response to inflation when that also increases mortgage repayments, rent pressures and the overall cost burden many people are already carrying.

“That creates a sense of being caught in a cycle where prices remain high, yet the cost of managing those higher prices becomes even more expensive.

“Understandably, sentiment is low given current predictions point to more rate rises to come. There’s little light at the end of the tunnel and little hope of reprieve any time soon.”

Impact on borrowers and borrowing power in Queensland

Ms Mercorella said while the labour market remained resilient and there were no widespread indications or material trends of mortgage distress yet, it was somewhat surprising that household budgets were still coping and keeping up with repayments.

“While Queensland households have shown remarkable resilience, today's increase will further erode disposable income and leave less room in household budgets to absorb future economic shocks,” Ms Mercorella said.

“The cumulative effect is the most concerning. Borrowers don't just absorb today's increase, they're still carrying the financial impact of February, March and May, and today’s decision piles even more pressure onto already stretched household budgets.

“Further it chips away at buyers’ capacity to compete in the market - limiting the range of properties many Queenslanders can realistically consider and potentially delaying home ownership for first home buyers.”

For a borrower with Queensland’s average new owner-occupier loan of around $750,000, today’s increase could add approximately $116 to monthly mortgage repayments.^[1] When combined with the February, March, and May rate rises, this represents an additional mortgage burden of around $458 per month, or $5,496 per year.

Higher interest rates also directly affect borrowing power. As a result of this hike, a single buyer earning Queensland’s average full-time income of $106,100 could see their borrowing capacity reduced by around $12,000, while a dual-income household with children may experience a reduction of around $17,000.^[2] Across the four rate increases, borrowing capacity has fallen by an estimated $49,000 for a single-income buyer and $71,000 for a dual-income household.

More pressure on rental supply

Ms Mercorella said there was also concern about the impact on housing investment and rental supply against a backdrop of persistently low vacancy rates.

“It is another blow to property investors, many of whom are still getting their heads around significant changes to federal investor tax settings,” she said.

“We’ve been seeing some early inroads in house supply, but higher borrowing costs combined with uncertainty around property investment settings risks reducing the flow of private capital into new and existing rental housing.

“That matters because Queensland's vacancy rate remains at just 1.0% statewide, well below a healthy range of 2.6% to 3.5%.^[3]

“In markets where vacancy rates are already chronically and critically low, any reduction in investor participation risks further tightening rental supply and placing additional pressure on tenants.”

Housing supply is key

Ms Mercorella said the greater concern for Queensland and Australia remains the supply side of the housing equation.

“Interest rates cannot solve a housing shortage. Boosting the delivery of new homes and maintaining investment in housing stock will be critical to improving affordability and easing pressure across both the ownership and rental markets,” Ms Mercorella said.

“Queensland delivered 33,100 dwellings in the year to March 2026, well short of its annual target of 49,300 homes, highlighting the scale of the state's housing shortfall.

“However, some positive signs have started to prevail. Queensland’s dwelling approvals pipeline was running at 4,361 dwellings in trend terms in July 2026, above the roughly 4,100 approvals required each month to meet the state's National Housing Accord target.

“Also, there are now a record 50,000 dwellings under construction across the state.^[4] This is a good signal for future easing of supply pressures in Queensland.”^[5]

ENDS

Media enquiries: Claire Ryan, REIQ Media Manager, M: 0417 623 723 E: media@reiq.com.au

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