The Reserve Bank lifted the cash rate to 4.60% on 29 September 2026, its fourth rise this year. For a lot of capable, well-paid professionals, the instinct now is to hold off. Wait for the rate to come down. Refuse to pay a cent more than the cheapest lender on the comparison table.
That instinct feels prudent. It can also be expensive.
The rate is the cost you can see on a statement every month. The cost of waiting to buy property never shows up on a statement at all. This article puts the two side by side, using a worked example over ten years, and explains why a slightly higher rate that gets you into the right asset can carry far less weight than the asset you never bought.
Rate or asset: which decision carries more weight?
Most buyers frame the decision around the rate: “Is 6.75% too much when someone else is offering 6.25%?”
The better question is what each option lets you own, and what that ownership could be worth in ten or twenty years.
A rate is a price you pay while you hold an asset. The asset is the thing that does the work over time: growth in value, rent if it is an investment, security and rent you no longer pay if it is your home, and equity you can use later. When the rate is judged in isolation, it gets far more weight than it has ever earned.
Why the lowest rate and the most borrowing power aren’t always at the same lender
This is the link most rate commentary misses.
Lenders differ, sometimes widely, in how they assess the income high earners actually receive. Bonuses and commission, share-based pay, allowances, and income earned through your own company are each treated differently from one credit policy to the next. Some average two years. Some discount heavily. Some accept a shorter track record than others.
The result is that two lenders can look at the same professional and arrive at very different borrowing capacities. And the lender whose policy recognises your income most accurately is not always the lender with the lowest advertised rate.
That creates a real choice. One option is the lowest rate, with the smaller loan that comes with it. The other is a slightly higher rate, with a loan that reflects what your verified income genuinely supports.
To be clear about the boundaries: this is about income being assessed accurately, never about stretching the numbers. The income has to be real, documented and sustainable. The loan still has to pass APRA’s 3 percentage point serviceability buffer and every responsible lending check the lender applies. Nothing here involves getting around those controls.
A worked example: three households, one decade
Illustrative example only. It is not a forecast, not a recommendation and not based on a real client. Figures are simplified and pre-tax, and exclude purchase costs, rent, holding costs and fees. Growth rates are hypothetical.
Three households each have a $240,000 deposit and similar incomes.
- Household 1 waits. They keep renting and hold the deposit in savings earning 4% a year, planning to buy when rates fall.
- Household 2 takes the lowest rate. That lender’s policy counts less of their bonus income, so they borrow $760,000 at 6.25% and buy a $1.0 million property that is a compromise on location and land.
- Household 3 pays 0.5% more. A lender whose policy recognises more of their bonus income lends $960,000 at 6.75%. They buy a $1.2 million property in a stronger location with more land.
We assume the compromise property grows at 3% a year and the stronger one at 5%.
| After 10 years | Household 1: waits | Household 2: lowest rate | Household 3: higher rate |
|---|---|---|---|
| Property purchased | None | $1,000,000 | $1,200,000 |
| Loan and rate | None | $760,000 at 6.25% | $960,000 at 6.75% |
| Monthly repayment | $0 (rent continues) | $4,679 | $6,227 |
| Value of what they hold | $355,259 in savings | $1,343,916 property | $1,954,674 property |
| Loan balance remaining | None | $640,207 | $818,890 |
| Equity | $355,259 | $703,710 | $1,135,784 |
Over the decade, Household 3’s higher rate costs about $48,000 in extra interest compared with borrowing the same amount at 6.25%. If they refinance to 6.25% after two years, which is often possible as income and equity grow, that cost falls to about $9,600.
Against that, Household 3 finishes with about $432,000 more equity than Household 2, and about $780,000 more than the household that waited.
Where the extra repayment actually goes
Household 3 pays $1,548 a month more than Household 2. Only $316 of that is the higher rate. The other $1,232 is the larger loan, and it is buying a better asset. That distinction matters, because the larger repayment has to be comfortably affordable, which we come back to below.
What if the better asset underperforms?
Suppose the stronger property grows at only 3%, the same as the compromise. Household 3 still finishes with about $794,000 of equity, around $90,000 ahead of Household 2, because the larger asset compounds on a larger base.
If the property doesn’t grow at all, the higher rate becomes a pure cost. That is the honest limit of this argument, and it is why the quality of the asset is the whole game. Paying more to buy a poor asset makes things worse, not better.
For context, Cotality’s Home Value Index shows national dwelling values rose 66.5% over the ten years to August 2026, about 5.2% a year compounded, while Sydney values fell 4.6% over the most recent 12 months. Past performance is no guide to what any individual property will do.
What no one else is saying
Doing nothing is also a decision, and it has a price. It just never arrives as an invoice.
The rate premium is visible and it is usually temporary. Loans get repriced and refinanced. The cost of waiting is invisible and permanent. Time in the asset that was not spent. Rent that was paid instead. A deposit that buys less if values move before you do.
Cotality’s data shows national rents rose 5.7% over the 12 months to August 2026, and 39% over five years. For a household renting while it waits for a lower rate, that is a real cost that compounds too.
Nobody can promise that buying now beats waiting. Values can fall, and sometimes waiting pays. But a decision that treats half a percent of interest as the biggest number on the page has usually measured the wrong thing.
Why people buy in the first place
It is easy to lose sight of the purpose when the conversation is all about rates. The reason for buying is what gives the rate its proper weight.
When it is your home
- Security and control. No lease renewals, no rent reviews, no landlord deciding when you move.
- Repayments that build equity. Rent is spent. Principal repayments build ownership, and on a principal and interest loan that share grows every year.
- Growth on the family home. Growth on a main residence is generally exempt from capital gains tax under the ATO’s main residence rules, subject to the eligibility conditions. Your accountant can confirm how this applies to you.
- Equity for what comes next. Equity in the home can support a future upgrade, renovation or investment, subject to a lender’s assessment at the time.
With the right lending strategy, some owners become mortgage-free in as little as 7 to 10 years. Our free Mortgage Elimination Blueprint explains the levers.
When it is an investment
- Growth and income. Capital growth over time, plus rent that helps meet the holding cost.
- A base for the next step. Growth in equity can make a future purchase possible without another full cash deposit.
- Selection matters more than ever. Since the 2026 tax reform, rental losses on established residential property bought after 7:30pm AEST on 12 May 2026 can no longer be offset against wage income from 1 July 2027. In our assessments that can reduce borrowing capacity on the same income significantly, in some cases by 20% or more, and it raises the after-tax holding cost. The cash-flow profile of the property, the size and length of any early losses, and the ownership structure all deserve careful modelling with your accountant before any commitment.
In both cases the outcome being aimed for is the same: a quality asset held long enough for its growth to do the heavy lifting. The finance is what gets you there. Our free First Time Property Investor Guide covers how asset selection fits into the wider plan.
A higher rate is often a starting point, not a life sentence
In the example, the rate premium falls from about $48,000 to about $9,600 if the loan is refinanced after two years. That reflects how loans tend to work in practice.
- Variable rates can be reviewed at any time, and your existing lender may reprice on request.
- As income rises, a bonus history lengthens or equity builds, more lenders may assess your application favourably, which can open up sharper pricing.
- Rates themselves move in cycles. The cash rate went from 0.10% in 2020 to 4.35% in 2023, eased to 3.60% by August 2025 and is 4.60% today. A 30-year loan will see several turns.
Refinancing has costs and depends on a lender’s assessment at the time, including the higher rate lenders test at, so it is never automatic. But the purchase price and the asset you choose are locked in the day you settle. The rate is the part of the decision most open to improvement afterwards. We review loans as circumstances change for exactly that reason.
When paying a higher rate doesn’t make sense
The opportunity-cost argument has limits, and they matter as much as the argument itself.
- The asset isn’t quality. A premium rate to buy a compromised property combines the worst of both options.
- The larger repayment is a stretch. In the example, Household 3 commits to $6,227 a month. If that leaves no buffer for a rate rise, a lower bonus or a vacancy, the plan is fragile. A rise from 6.75% to 8.75% on that loan would add about $1,326 a month.
- Borrowing edges into over-leveraging. APRA has capped new lending at a debt-to-income ratio of 6 times or more at 20% of each bank’s new loans since February 2026. The lender’s maximum is not a target.
- There’s no plan to hold. Growth only compounds for owners who can stay in. Forced sales in a soft market are how good assets turn into bad outcomes.
Paying a slightly higher rate works when it buys a better asset, the repayments sit comfortably inside your cash flow with a buffer to spare, and you can hold through the next downturn. Remove any one of those and the numbers change.
The professionals behind a good decision
- Your broker assesses which lenders’ policies recognise your income accurately, compares the trade-off between rate and borrowing capacity, structures the loan and reviews it over time.
- Your accountant models tax outcomes, including the 2026 negative gearing and CGT changes and the ownership structure.
- A licensed financial adviser considers whether property suits your broader goals alongside other asset classes.
- A buyer’s agent can help assess asset quality, which the example shows is where most of the outcome is decided.
- Your solicitor or conveyancer protects you through the contract, including the finance clause.
Frequently asked questions
Is it worth paying a higher interest rate to borrow more?
It can be, when the extra borrowing capacity buys a better-quality asset, the repayments are comfortably affordable with a buffer, and you plan to hold long term. It is rarely worth it to buy a poor asset or to stretch cash flow to the limit.
What is the cost of waiting to buy property?
It includes rent paid in the meantime, growth missed if values rise, and a deposit that may buy less later. Waiting can also pay off if values fall. The point is that waiting has a cost too, even though it never appears on a statement.
Why would a lender with a higher rate lend me more?
Lenders use different policies to assess income such as bonuses, commission, share-based pay and self-employed earnings. A lender that recognises more of your verified income may assess a higher borrowing capacity, and its pricing may not be the lowest on the market.
Can I refinance to a lower rate later?
Often, subject to a lender’s assessment of your circumstances at the time. Rising income, a longer bonus history or more equity can widen your options. Refinancing has costs, so the full picture is worth comparing.
Should I buy property when interest rates are high?
It depends on your goals, the asset and whether you can comfortably hold it, rather than the rate alone. Higher rates can reduce borrowing power and increase holding costs, but they can also mean fewer competing buyers.
Does this apply to owner-occupiers as well as investors?
Yes. The trade-off between rate and asset quality applies to both. For owner-occupiers the benefits include security and building equity instead of paying rent. For investors they include rental income and growth, now with more weight on property selection after the 2026 tax changes.
How much of a bigger repayment is the rate, and how much is the loan?
In our example, $316 of a $1,548 monthly difference came from the higher rate. The rest came from the larger loan, which bought a better asset. Separating the two helps you judge what you are really paying for.
The cost of waiting to buy property is real
Interest rates matter. But when a slightly higher rate is the price of borrowing enough to buy a quality asset, the rate is usually the smaller number. The larger one is what that asset could be worth after years of ownership, and what it costs to spend those years waiting instead.
The key is to get the finance right: a lender whose policy fits your income, a loan structure with room to breathe, and an asset worth holding. We are here to support you every step of the way, from the first strategy conversation to reviewing your loan as your income and equity grow.
If you would like to see how the trade-off between rate and borrowing capacity looks for you at today’s 4.60% cash rate, book a complimentary 30-minute strategy call. It is about understanding your situation, your goals and what you are looking to achieve.
General information only. Not personal tax or financial advice. Tax and investment decisions should be made with your accountant and a licensed financial adviser who know your full circumstances.
Sources
- Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision, 29 September 2026: rba.gov.au/media-releases/2026/mr-26-27.html
- Reserve Bank of Australia, Monetary Policy Decision, 12 August 2025 (cash rate lowered to 3.60%): rba.gov.au/media-releases/2025/mr-25-22.html
- Reserve Bank of Australia, Cash Rate Target history: rba.gov.au/statistics/cash-rate
- Commonwealth Bank newsroom, RBA raises official cash rate to 4.60% in fourth increase of 2026 (cumulative 100 basis points in 2026): commbank.com.au
- APRA, Activating debt-to-income limits as a macroprudential policy tool (DTI 6x or more capped at 20% of new lending from February 2026; serviceability buffer 3 per cent): apra.gov.au
- APRA, APRA announces update on macroprudential settings, 23 July 2025: apra.gov.au
- Cotality, Home Value Index, results to 31 August 2026 (national 10-year growth 66.5%, Sydney 44.4%, Sydney annual change -4.6%, national quarterly -3.1%, annual +2.7%; national rents up 5.7% over 12 months and 39% over five years): discover.cotality.com
- ATO, Your main residence (home) and eligibility for the main residence exemption: ato.gov.au
- Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Royal Assent 26 June 2026 (negative gearing changes for established residential property purchased after 7:30pm AEST 12 May 2026, effective 1 July 2027). Your accountant can confirm how it applies to you.
- Worked example repayments, balances, interest and equity: Build & Protect calculations using a standard 30-year principal and interest amortisation formula. Illustrative only.
- Featured image: Cameron Tidy on Unsplash, Unsplash License.
Build & Protect Financial Services. Credit Representative 539491 of Australian Finance Group Ltd (ACN 066 385 822), Australian Credit Licence 389087. This article is general information only and does not constitute personal financial or credit advice. Consider your own circumstances and seek advice from a licensed professional before acting.