The short answer: the Reserve Bank raised the cash rate target three times in 2026, in February, March and May, and left it unchanged in June and August (RBA, Cash rate target). Most coverage focuses on what that does to repayments. For anyone about to borrow or refinance, the bigger effect is on the assessment. Lenders have to test whether you could still repay at a rate at least 3 percentage points above your loan's rate, so when loan rates rise, the test rate rises with them and the same income supports a smaller loan. For an Aussie expat, that test is applied to income the lender has already adjusted for being earned overseas.
This isn't a forecast. The RBA's next decision is due on 29 September 2026, and nothing here predicts it. It's about how the rises already made feed into a lender's numbers.
What the RBA did in 2026
The Monetary Policy Board lifted the cash rate target on 3 February, 17 March and 5 May 2026, then held it on 16 June and 11 August (RBA, 3 February 2026; 17 March 2026; 5 May 2026; 11 August 2026). The cash rate isn't a home loan rate. Each lender decides whether and how far to move its own rates, and your loan documents and lender notices show what happened to yours.
The test lenders apply: the serviceability buffer
Under APRA's prudential standard for residential mortgage lending, banks must assess a borrower using a buffer over the loan's interest rate of at least 3 percentage points, unless APRA decides otherwise. APRA's guidance says the buffer is added to the rate you'd actually pay, not a discounted introductory rate, and that lenders are expected to apply buffers to your existing debts as well as the new loan (APRA, Prudential Practice Guide APG 223). APRA last confirmed the buffer at 3 percentage points on 28 May 2026 (APRA, macroprudential policy update, May 2026).
The effect is mechanical. The buffer stays the same size, so every rise in the loan rate lifts the test rate by the same amount. When APRA last raised the buffer, it said a higher assessment rate reduces the maximum a typical borrower can borrow (APRA, October 2021). A rise in the actual rate works through the same test.
A second setting sits alongside it. Since 1 February 2026, APRA has limited how much of each bank's new lending can go to borrowers whose total debt is six or more times their income, counted separately for owner-occupier and investor loans. Bridging loans for owner-occupiers and loans for building or buying a newly built home are exempt (APRA, debt-to-income limits). It's a cap on the lender's overall book, not a rule about any one borrower, but it's one more reason a high-debt application can get a different answer from lender to lender.
Why the offshore version is different
Lenders have to take reasonable steps to verify your financial situation before they lend, and income is an essential part of that (ASIC, Regulatory Guide 209). For income earned overseas, lenders typically don't count every dollar. Many apply a discount to foreign-currency income, often called shading, and some then work out your net income using Australian tax rates rather than the rates you actually pay. This varies by lender and by currency.
The buffer is then applied on top of that adjusted income. So an expat and a local borrower with the same salary can come out with quite different borrowing power after the same rate rise, because the expat's income entered the test already reduced. See how Australian lenders assess overseas salary for more on the income side.
What it means depending on where you are
If you're about to buy
If a pre-approval was issued before the rises, check its expiry date and ask whether the lender would reassess it at today's rates before you sign a contract. A figure worked out earlier in the year may not be the figure a lender would give you now.
If you're thinking about refinancing
This is where the test catches people out. A new lender assesses you at its own rate plus the buffer, on your current income as it reads your income. You can be paying your current loan comfortably and still not meet a new lender's test, particularly if your income is now earned overseas and it wasn't when the loan was first written. It's worth knowing where you stand before you start an application, because each application leaves an enquiry on your credit file.
If you're simply holding
The assessment only applies when you ask a lender for something new, such as a refinance, a top-up or another purchase. Your existing loan isn't reassessed because rates have risen, although your repayments may change.
Questions worth asking
- If I applied today, how would a lender treat my overseas income, and what would the test rate be?
- Is my pre-approval still current, and would it be reassessed before settlement?
- If I wanted to refinance or release equity in the next year or two, would I still meet a new lender's test on my current income?
Want to check where you stand?
If you'd like to see how a lender would look at your numbers now, book a call with our team.
Sources
- Reserve Bank of Australia: Cash rate target (accessed 18 September 2026)
- Reserve Bank of Australia: Monetary Policy Decision, 3 February 2026 (accessed 18 September 2026)
- Reserve Bank of Australia: Monetary Policy Decision, 17 March 2026 (accessed 18 September 2026)
- Reserve Bank of Australia: Monetary Policy Decision, 5 May 2026 (accessed 18 September 2026)
- Reserve Bank of Australia: Monetary Policy Decision, 16 June 2026 (accessed 18 September 2026)
- Reserve Bank of Australia: Monetary Policy Decision, 11 August 2026 (accessed 18 September 2026)
- Reserve Bank of Australia: Monetary Policy Board meeting schedule (accessed 18 September 2026)
- APRA: Prudential Practice Guide APG 223 Residential Mortgage Lending (accessed 18 September 2026)
- APRA: macroprudential policy settings, 28 May 2026 (accessed 18 September 2026)
- APRA: increase to loan serviceability expectations, October 2021 (accessed 18 September 2026)
- APRA: debt-to-income limits, 27 November 2025 (accessed 18 September 2026)
- ASIC: Regulatory Guide 209, Credit licensing: responsible lending conduct (accessed 18 September 2026)
Aussie Expat Home Loans holds Australian Credit Licence 509125. This article is general information only and doesn't take your personal circumstances into account. It doesn't quote interest rates or forecast rates, and it doesn't estimate borrowing capacity or repayments. Cash rate decisions are as published by the RBA up to its 11 August 2026 decision, and this article is current to 18 September 2026. Lender policies vary and change over time. Before acting, consider your own situation and seek advice specific to it.
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