“The May 0.25% rise reduced borrowing capacity by approximately $12,000 to $18,000 for every $100,000 of income.”
The 5 May 2026 increase took the cash rate from 4.10% to 4.35%. Because lenders add a 3% serviceability buffer on top of the assessed rate, the test rate applied to new applications has moved from approximately 9.1% to approximately 9.35% — a reduction in assessed capacity that is immediately applied to new applications.
The impact by income level
At $80,000 gross: the May rise reduces maximum borrowing capacity by approximately $10,000–$14,000. At $100,000 gross: approximately $13,000–$18,000. At $150,000 gross: approximately $18,000–$27,000. At $200,000 combined: approximately $25,000–$35,000. These are estimates for borrowers with clean financial profiles — debt and dependants reduce the absolute figure further.
The cumulative 2026 effect
The May rise is the third of 2026. Cumulatively, the three rises of 0.75% have reduced borrowing capacity from January 2026 levels by approximately $36,000–$54,000 at $100,000 income. This is real and meaningful — particularly for borrowers targeting properties at the upper end of their capacity.
If you had a pre-approval
Pre-approvals are typically valid for 90 days and may be subject to reassessment if rates have moved since issuance. If your pre-approval was issued before the March 2026 rise, the figure may reflect a capacity that no longer matches current assessment criteria at your lender. Confirming your current assessed capacity with your broker before making an offer is important.
What this means practically
For most borrowers, the May reduction doesn’t materially change the strategy. It does mean that if you were previously assessing your capacity as marginal for a specific price point, the margin has narrowed. Getting current figures across multiple lenders — not just your existing bank — gives you the most accurate position.
→ You may wish to speak with a licensed mortgage broker to assess your personal circumstances. This is general information only. Individual circumstances vary and scheme details change regularly. Verify current eligibility, caps, and terms with official sources before making decisions. Speak with a licensed mortgage broker for advice tailored to your situation. All loans are subject to lender approval.
Sources: RBA, Monetary Policy Decisions February, March and May 2026 (rba.gov.au); APRA, Letter to ADIs — Mortgage Serviceability, October 2021; JMD Mortgages, RBA June 2026 Meeting Outlook.
