Home Loans

The Australian home loan market has shifted dramatically in 2026. The RBA raised the cash rate twice in quick succession — first to 3.85% on 3 February 2026, then to 4.10% on 17 March 2026 — reversing every rate cut made in 2025 within a single board meeting cycle. At the same time, APRA activated new debt-to-income (DTI) lending caps from 1 February 2026, and the First Home Guarantee was massively expanded with no income caps and no place limits from October 2025. If you’re buying, refinancing or investing, understanding these changes is essential. This guide gives you the full picture for April 2026.

RBA Cash Rate — where we are in April 2026

The RBA cash rate currently sits at 4.10% following back-to-back hikes in February and March 2026. The March decision was close — a narrow 5–4 vote — but the direction is clear. Governor Bullock has explicitly stated that inflation at 3.8% is “too high” and that the RBA’s own forecasts don’t see inflation returning to the 2–3% target band until mid-2027 at the earliest.

What this means for borrowers right now:

• Variable home loan rates are sitting around 6.10–6.70% depending on lender and loan type
• Big-four fixed rates have climbed sharply — sub-5% deals have virtually disappeared, with big-four fixed rates now around 5.79–6.49%
• Non-major lenders are offering variable rates 40–80 basis points below the big four — often only available through mortgage brokers
• Every 0.25% rate increase adds approximately $77/month on a $500,000 loan — the two 2026 hikes combined add around $155/month

ANZ, Commonwealth Bank, NAB and Westpac all forecast a further hike to 4.35% at the May 2026 RBA meeting. The Middle East conflict and fuel price pressures have added new upside risks to inflation.

APRA’s New DTI Lending Caps — what changed from 1 February 2026

From 1 February 2026, APRA activated Australia’s first formal debt-to-income (DTI) lending cap. Banks are now restricted from issuing more than 20% of new mortgages to borrowers with a DTI ratio of 6x or higher.

What this means in practice:

Important nuances: The APRA cap doesn’t change your serviceability calculation — lenders still stress-test at actual rate + 3%. But it does create a quota system: once a lender has used up 20% of its quarterly allocation on high-DTI loans, it stops approving them — even for creditworthy borrowers. Non-bank lenders are exempt from the DTI cap, which is a significant advantage for high-income borrowers who need to borrow above 6x income.

The Serviceability Buffer — why 9% is the real test rate

APRA’s 3% serviceability buffer remains unchanged. This means lenders must stress-test every new application at the actual interest rate plus 3 percentage points. With variable rates now around 6.10–6.50%, the test rate effectively enters 9.10–9.50%.

This is where many applications hit a wall — not because borrowers can’t afford today’s rate, but because they can’t demonstrate they could afford a rate nearly 3 percentage points higher than what they’d actually pay.

Strategies to improve your serviceability assessment:

• Close unused credit card limits: Banks assess cards at the total limit, not the balance. A $10,000 limit you never use can reduce your borrowing power by $35,000–$50,000
• Cancel unused BNPL accounts: Afterpay, Zip and Klarna are now treated as liabilities in serviceability assessments
• Reduce declared living expenses: Banks compare your declared expenses against the Household Expenditure Measure (HEM) — be accurate but not inflated
• Pay down high-interest debt first: Credit card and personal loan debt reduces serviceability faster per dollar than HECS/HELP
• Apply early in the quarter: DTI allocations reset quarterly — applying in January–March or April–June gives you access to fresh lender allocations

Fixed vs variable — what makes sense in April 2026?

The most popular strategy in April 2026 is a split loan — fixing part (30–50%) for certainty while keeping the rest variable for flexibility and offset account benefits. This gives you protection if rates rise again in May while still allowing you to benefit if they eventually fall.

First Home Buyer — expanded schemes in 2026

Two major government schemes changed significantly from October 2025, making 2026 materially better for first home buyers:

First Home Guarantee (previously FHLDS):

• No annual place cap (previously limited to 35,000 places per year)
• No income cap (previously $125,000 singles / $200,000 couples)
• Sydney property price cap raised to $1,500,000 (from $900,000)
• Eligible borrowers can buy with a 5% deposit without paying Lenders Mortgage Insurance (LMI)

Help to Buy: A shared equity scheme where the government contributes up to 40% of a new home or 30% of an existing home’s purchase price, reducing the amount you need to borrow — and therefore your repayments and DTI ratio.

Mortgage stress in 2026 — are you at risk?

Roy Morgan’s March 2026 data shows 26.6% of Australian mortgage holders (approximately 1.32 million households) are now at risk of mortgage stress — up from 23.9% just before the February rate hike. If your monthly repayments are consuming more than 25–30% of your after-tax income and leaving insufficient buffer for living costs, you may want to consider refinancing, switching to a lower-rate lender or asking your bank about hardship assistance.

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