On Tuesday, 3 February 2026, the Reserve Bank of Australia increased the cash rate target by 25 basis points to 3.85%.
If you’re buying in Sydney right now, the headline can feel loud. The on-the-ground reality is quieter:
- This changes borrowing power and buyer behaviour the fastest.
- It changes prices more slowly and not evenly
- It rewards buyers who are calm, prepared, and selective.
Below are the 25 questions we’re hearing today with plain answers and practical next steps.
At a glance
- The cash rate is not your home loan rate, but it does influence it.
- Even when price growth doesn’t “drop,” a rate rise can still soften competition and improve negotiation conditions in some pockets.
- Lenders assess new loans using a minimum 3% serviceability buffer, so rate moves can affect borrowing power more than people expect.
1) What did the RBA actually do today?
They increased the cash rate target to 3.85% (a 0.25% / 25bp move).
2) Why did they raise rates?
In their statement, the RBA said inflationary pressures picked up materially in the second half of 2025, and that private demand and capacity pressures look stronger than previously assessed.
3) What is the “cash rate” in normal English?
It’s the benchmark interest rate set by the central bank that influences the cost of money across the economy, including what banks charge for variable mortgages.
4) Does this automatically mean my bank rate goes up?
Often, yes, but timing and “pass-through” can vary by lender and product. The cash rate is the benchmark; your actual home loan rate is set by your lender.
5) I’m pre-approved. Do I need to redo it now?
If you’re near your limit, it’s smart to reconfirm your borrowing ceiling with your broker/bank before you bid or sign. Rate moves can change the assessment rate and therefore your maximum.
6) Will my borrowing power drop?
Potentially, especially for buyers borrowing close to their max. Even small changes can matter at the margin because lenders assess serviceability conservatively.
7) What’s the “serviceability buffer” and why do buyers keep talking about it?
When assessing new home loans, banks must apply a minimum 3% buffer above the loan rate to test if you could handle higher repayments. So even a modest increase can reduce borrowing power more than people expect.
8) Does a rate rise mean prices will fall?
Not automatically. Property prices are set by (1) how many quality homes are available and (2) how many qualified buyers are competing. Rates influence the second part, but supply/quality still dominates in many Sydney family-home pockets.
9) So what does change fastest after a rate rise?
Three things, usually:
- Buyer confidence (some pause)
- Borrowing ceilings (buyers recalibrate)
- Auction behaviour (fewer “emotional overshoots”)
10) Should we pause our search for a few months?
Only if pausing improves your outcome. If you’re buying a long-term home and you find a genuinely scarce property that fits, waiting “just because rates moved” often becomes expensive in regret.
Better approach: tighten your process rather than stopping.
11) What happens to auction clearance rates after a hike?
They can soften in the short term as buyers adjust. But the effect is uneven: A-grade homes (light, layout, land, location) still attract competition, just sometimes with a sharper ceiling.
12) Will this create better negotiation opportunities?
Often, yes, particularly for:
- properties with compromised fundamentals (noise, poor light, awkward layouts)
- vendors who need certainty
- listings that “missed” in the first 2-3 weeks and are now chasing the market
13) Does this make off-market easier?
It can. In a slightly cooler mood, vendors become more open to quiet certainty over public theatre, but only if your offer is credible and well-structured (timing, deposit, conditions).
14) Are houses or units more rate-sensitive in Sydney?
Broadly:
- Units can be more sensitive where there’s more choice (higher substitutability).
- Family houses in school-and-transport pockets can be less sensitive because scarcity is real. But the truth is property-specific: a great unit can outperform a compromised house.
15) What’s a “rate-resilient” property?
A property that still attracts demand even when buyers are cautious. Typically it has:
- great natural light + ventilation
- a functional floorplan
- a strong street (quiet/leafy where relevant)
- walkability to the things people actually use
- and a scarcity factor (it’s not “one of 50”)
16) What should first-home buyers do differently after today?
Two things:
- Don’t shop on the absolute max. Keep a buffer for real life.
- Be strategic about compromises: location vs size vs condition. Make one compromise, not five.
17) What about upgraders who need to sell and buy?
Rate moves make “timing risk” more important:
- Be realistic about your sale price and sale timeframe.
- Avoid signing a purchase that assumes a perfect sale outcome.
- Build a Plan B for bridging or settlement timing (even if you never use it).
18) Will vendors drop their expectations immediately?
Usually not. Many vendors anchor to last month’s prices. The market adjusts when buyers stop bidding at the old level, not when headlines change.
19) What should we do with our budget right now?
Don’t panic-slash it. Do this instead:
- Get your updated ceiling
- Choose your “must-haves” (non-negotiables)
- Then adjust suburb/property type surgically (one lever at a time)
20) Does this change what we should do about building & pest / due diligence?
If anything, it reinforces it. In a market where buyers are watching cash flow more carefully, you don’t want surprises post-settlement. Good due diligence is still the cheapest insurance you’ll ever buy.
21) Should investors change strategy after a rate rise?
Investors should re-focus on:
- cashflow resilience (can you hold if rates rise again?)
- tenant demand durability (who rents this, and why?)
- scarcity and replacement cost (what makes this asset hard to replicate?)
22) Do rents “automatically” rise when rates rise?
Not automatically, rents move with vacancy, wage capacity, and supply. Rate rises can increase landlord costs, but tenants don’t pay based on your mortgage. They pay based on market rent.
23) What does the RBA’s wording tell you about the next 6-12 months?
They’ve signalled concern that inflation could remain above target for some time, and capacity pressures are still present.
For buyers, that translates to: plan for uncertainty, keep buffers, and buy assets that hold demand.
24) What should a buyer do this week, practically?
A simple 7-day checklist:
- Reconfirm the borrowing cap with your broker/bank
- Decide your non-negotiables (3 max)
- Re-rank your suburb list (A/B/C)
- Review your last 5 missed properties. Why did you miss them? (price, timing, prep?)
- Tighten your pre-offer due diligence process
- Set a walk-away number before auctions
- Focus only on A-grade opportunities (ignore the noise stock)
25) What does a buyer’s agent actually do differently in a rate-rise environment?
This is where the value becomes very practical:
- We keep your budget realistic without panic-compromises
- We identify which listings are likely to negotiate (and why)
- We stress-test properties for resale/rent demand under tighter conditions
- We structure offers for certainty, not just price
- And we help you buy with a calm plan, not a headline reaction
A calm closing thought
The RBA move matters, but it doesn’t change the fundamentals overnight.
In Sydney, the best properties are still scarce. The difference now is that buyers who are prepared, disciplined, and buyer-first tend to make better decisions while everyone else is distracted by noise.
If you want help pressure-testing your plan, that’s exactly what we do at Parker Hadley.
