The number nobody printed
Forget the monthly repayment for a second and think about what a client can borrow.
A buyer who could service a $600,000 loan at the start of this year, on the same income, with the same deposit and the same job, can service about $523,000 today. Four rises have taken roughly $77,000 off their borrowing power. That is close to 13 per cent of the job gone, and they did nothing wrong.
If the Bank goes again on 3 November, that same buyer is down to about $510,000. Ninety grand off where they started the year. Over 15 per cent.
| What your client can borrow, same income, same repayment budget | Amount |
|---|---|
| Start of 2026 | $600,000 |
| Today, after four rises | $523,000 |
| If November goes too | $510,000 |
Look at that middle row and ask yourself what it does to a quote. A client who was pricing a four bedroom build is now pricing a three. A client who wanted the extension and the new kitchen is picking one. The job did not disappear. It shrank by seventy seven grand.
Rate rises do not cancel jobs. They shrink them. The extension becomes a reno, the reno becomes a bathroom, and the bathroom becomes next year.
What the Bank actually said
Worth reading the statement rather than the headlines, because the Board was blunt.
Inflation remains elevated. Several upside risks are materialising, including the broadening Middle East conflict pushing global energy prices and the cost of AI driven technology. The Board said it will continue to do what it considers necessary to bring inflation back to target, and that includes increasing the cash rate further if needed.
Then the line that should interest builders most. The Board noted that housing prices have fallen and new housing loans have declined.
That is the Reserve Bank confirming the transmission is already working. Fewer loans written means fewer jobs in your pipeline in six to twelve months. They are not guessing at it. They are watching it happen and treating it as evidence the medicine is working.
The cruel part
Here is the bit that should annoy every builder in the state.
The August inflation figures came out the day after the decision. Headline inflation hit 4 per cent, up from 3.5 per cent in July. The two biggest drivers were fuel, up 14.8 per cent in the month, and new dwelling prices, up 5.4 per cent.
Read that again. The cost of building new homes is one of the main things keeping inflation high, which is one of the main reasons rates keep rising, which is what crushes demand for new homes.
Your input costs are helping drive the rate rises that are shrinking your jobs. You are getting it from both ends and you did not cause either one.
Will they go again on 3 November?
The honest answer is nobody knows, and the market has swung hard in the last week.
Straight after the September rise, another one looked likely. Then the August inflation figures landed slightly below what economists expected, and money market odds of a November rise dropped to roughly 20 per cent.
But do not file that as all clear. Trimmed mean inflation, which is the measure the Bank actually watches, has now sat at 3.6 per cent for three months straight. It is not falling. Westpac's chief economist still expects more rises before the end of the year. Others reckon the job is done.
| Where things stand | Figure |
|---|---|
| Cash rate now | 4.60% |
| Rises in 2026 | 4 |
| Highest level in | 15 years |
| Trimmed mean inflation, stuck for 3 months | 3.6% |
| Market odds of a November rise | ~20% |
| Next decision | 3 Nov |
So plan for a hold and be ready for a rise. One in five is not nothing, and the Board has told you in writing it will move again if it has to.
What a fifth rise would actually cost
On the repayment side, another quarter point adds about $98 a month on a $600,000 loan, $123 on $750,000 and $164 on a million.
Stack it on everything that has already happened this year and a $600,000 borrower goes from about $3,221 a month in January to about $3,792. That is $571 a month, or roughly $6,858 a year, out of a household budget that also has to absorb fuel up nearly 15 per cent.
But again, the repayment is not the story. The borrowing capacity is. Another quarter point takes about another $13,000 off what that client can borrow, on top of the $77,000 already gone.
Six ways this lands on your business
Quotes go cold instead of getting knocked back
Nobody rings to say the rate rise killed the job. They just stop answering. Watch your conversion rate over the next few months rather than your enquiry count, because enquiry often holds up while conversion falls away. If you are quoting the same volume and winning less, that is this.
Your pipeline thins six months out, not next week
Work already under contract keeps going. The damage shows up in approvals and commencements that feed your diary in the second half of next year. The National Housing Supply and Affordability Council said in August that softer sentiment and recent rate rises were likely to see some housing construction deferred, and the NSW Budget papers said much the same.
Deferred is the key word. Not cancelled. The work comes back, but the gap is where builders get hurt, because your overheads do not defer with it.
Developer feasibility stops stacking up
Higher rates raise the cost of development finance and soften what the end product sells for at the same time. Squeeze both ends and marginal projects stop working. They get shelved at feasibility stage, months before any subbie hears about it. If you work for developers or medium density builders, your forward book is quietly shrinking while your current jobs look fine.
The insolvency risk above you gets worse
We wrote recently about the Bathla collapse and what it means for NSW builders. Bathla management blamed softening sales, rising costs and changes that flowed through to lending markets. Higher rates push on every one of those.
More than 1,500 construction businesses went under in NSW in the 2025/26 financial year. Rate rises do not create that problem, but they do not help, and the bloke above you in the chain is feeling the same squeeze you are.
Cost pressure does not ease because rates went up
Rate rises cool demand. They do nothing about your input costs. New dwelling prices rose 5.4 per cent in August alone, and house construction costs are around 51 per cent higher than before COVID. Meanwhile there were 244,000 dwellings under construction nationally in the March quarter, the highest since records started in 1984, so trades and materials stay tight even as new work slows.
Squeezed clients, high costs, tight trades. That is the sandwich.
Your own borrowings cost more
Plant finance, vehicle finance, equipment leases, the overdraft, the line of credit against your house. The banks passed the September rise straight through. If any of that is variable, it went up too. Builders spend so much time on the client's finance that they forget their own.
Eight things worth doing before November
- Count your contracted weeks, not your quotes out. How many weeks of signed, deposit paid work do you actually have? Under twelve is a problem to fix this quarter, not next.
- Reprice for the smaller job. Your clients can borrow 13 per cent less than they could in January. If your only product is the big build, you are selling into a market that has moved. Have a smaller scope ready to offer before they walk.
- Tighten your quote validity. Ninety day quotes in a market where rates and costs both move means wearing risk for free. Thirty days is fair. Put it on the quote.
- Make your contingency real. If you are fixed price residential, and most of you are, your contingency is the only thing standing between you and wearing a cost rise yourself.
- Go back through your dead quotes. A client whose capacity dropped is not gone, they are stuck. A call offering a smaller scope you can start sooner beats ten cold leads.
- Get paid on time, every time. When money tightens, everyone above you stretches their terms. Serve compliant payment claims monthly and do not fund somebody else's cash flow problem.
- Check your own finance. Talk to your broker or accountant about the plant, the overdraft and whether any of it is worth fixing or restructuring before another move.
- Contract on every job, no exceptions. When money gets tight, disputes go up. Your contract and your records are the only things that protect you.
The other side of it
Worth saying, because the news will not.
NSW is well behind its housing targets and the underlying demand has not gone anywhere. The state government is pushing on approvals reform, the new Development Coordination Authority and prefabrication. Public infrastructure work is substantial and largely unaffected by household borrowing capacity. Population growth has not stopped.
Rate cycles turn. When they do, the deferred work comes back all at once into an industry that has lost capacity in the meantime, and the builders still standing with their licence current and their trade relationships intact are the ones who clean up.
The job between now and then is to be one of the ones still standing.
Frequently asked questions
What is the RBA cash rate now?
The cash rate is 4.60 per cent. The Reserve Bank raised it by a quarter point on 29 September 2026 in a unanimous decision. It was the fourth rise of 2026 and took the cash rate to its highest level in 15 years.
Will the RBA raise rates again in November 2026?
The next decision is 3 November 2026. After August inflation came in slightly below expectations, money market odds of another rise fell to around 20 per cent. However, trimmed mean inflation has held at 3.6 per cent for three months and the Board has said it will raise the cash rate further if needed, so another rise cannot be ruled out.
How do interest rate rises affect the construction industry?
Mostly through borrowing capacity rather than repayments. A client who could borrow $600,000 at the start of 2026 can borrow roughly $523,000 now on the same income, so projects get downsized or deferred rather than cancelled. Developer feasibility also tightens because finance costs more while end values soften, so projects get shelved before builders hear about them. The effect shows up in approvals and commencements six to twelve months out.
How much does another 0.25 per cent rise cost a borrower?
On a $600,000 variable loan over 30 years it is roughly $98 a month, about $123 on $750,000 and about $164 on $1 million, assuming the lender passes on the full rise. It also takes around another $13,000 off what that borrower can borrow.
What should builders do when interest rates rise?
Count how many weeks of contracted work you actually have, have a smaller scope ready to offer clients whose borrowing capacity has dropped, shorten quote validity periods, make sure your contingency is real if you are fixed price, revisit dead quotes, stay on top of progress claims, and review your own plant and business finance.
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