How RBA’s Latest Rate Decision Impacts Borrowing Power in 2026!

1. Background: December 2025 RBA Cash-Rate Decision

On 3 December 2025, the RBA left the cash rate at 3.60% for the fifth consecutive meeting. Governor Michele Bullock noted slowing inflation, but signalled further tightening may be needed if wage growth outpaces targets.

2. What It Means for Borrowing Capacity

• Serviceability buffers tighten. Lenders typically apply a +2.5% stress test. On a 6% assessment rate, your maximum loan shrinks by around 5–10%.

• Repayment shock. At current rates, every $100 000 borrowed costs about $600/month versus $520 at 3.85%.

• Deposit requirements. First-home buyers face higher LVR hurdles as lenders hold more capital against fixed-rate exposures.

  
  

3. APRA Lending Trends

According to APRA’s October 2025 data, owner-occupier approvals rose 2.1% year-on-year, while investment loans fell 4.7%. This suggests cautious appetite among buy-to-let investors.

4. Three Practical Tips

1. Lock in a fixed-rate split. Fix 40–60% of your loan at today’s rates to cap your repayments if the RBA tightens further.

2. Boost your deposit. Every extra 5% deposit can reduce LMI costs and widen your lender panel.

3. Review existing debts. Consolidate or refinance high-cost personal loans to improve serviceability.

   
   

Key Takeaways

• The RBA held rates at 3.60 in Dec 2025, with inflation still a risk.

• Borrowing power is down by 5–10% under current stress tests.

• Consider a fixed-rate split, larger deposit or debt consolidation.