Why they are expected to move

The Bank moved three times earlier in 2026, then held through July and August. The expectation is that the pause ends today.

The reason is inflation that will not come back to target. Headline CPI eased to 3.5 per cent over the 12 months to July, down from 3.8 in June, but trimmed mean inflation, which is the one the Bank actually watches, sat unchanged at 3.6 per cent. Both are above where the Bank wants them. Q2 GDP came in stronger than expected, and global energy prices have been climbing, which feeds straight back into inflation here.

Watch what comes next, because it is not necessarily over. ANZ has been forecasting a second hike in November that would take the cash rate to 4.85 per cent by year end. CBA has flagged that a hot Q3 inflation figure, which lands tomorrow, could push it the same way. Others are sitting data dependent.

So do not plan on this being the top. Plan on the possibility of another one before Christmas.

What it does to a client's borrowing power

This is the number that actually decides whether your job goes ahead, and almost nobody talks about it.

On a $600,000 loan at 6 per cent over 30 years, a quarter point adds about $97 a month, or roughly $1,164 a year, assuming the lender passes it all on. On $750,000 it is about $121 a month. On a million it is about $162.

Those numbers look survivable. Here is the one that is not.

Take a buyer who can afford the repayment on $600,000 at 6 per cent. At 6.25 per cent, the same monthly repayment only services about $584,000. They just lost roughly $16,000 of borrowing capacity, and they did not do anything wrong.

Now stack this year's rises together. On that same $600,000 loan, a full percentage point is about $381 a month, or roughly $4,573 a year. Run the borrowing capacity effect across a full point and you are talking tens of thousands off what a client can borrow. That part is already in your clients' budgets regardless of what happens at 2.30.

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.

That is the mechanism. Your client did not get poorer. The bank just decided they can borrow less. And lenders assess on top of a serviceability buffer, so the effect on capacity is bigger than the headline rate move suggests.

Six ways it lands on your business

Quotes go cold instead of getting knocked back

You will not get a call saying the rate rise killed the job. You will just stop hearing back. Quotes sit unanswered, clients go quiet, and the ones who do come back want the scope cut. Watch your conversion rate over the next two to three months rather than your enquiry rate, because enquiry often holds up while conversion falls away.

Your pipeline thins six months out, not next week

Work already under contract keeps going. The damage shows up in the 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 are likely to see some housing construction deferred, and the NSW Budget papers said much the same, that higher interest rates are expected to lower the pace of growth in dwelling investment.

Deferred is the key word. Not cancelled. The work comes back, but the gap in between 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 lower what the end product sells for at the same time. Squeeze both ends and marginal projects stop working. Projects get shelved at feasibility stage, which is months before any subbie hears about it.

If you do work for developers or medium density builders, that is your forward book quietly getting smaller while your current jobs look fine.

The insolvency risk above you gets worse

This is the one to take seriously. We wrote a few weeks ago about the Bathla collapse and what it means for NSW builders. Bathla management blamed a perfect storm of softening sales, rising costs and changes that flowed through to lending markets.

Higher rates push on every one of those. Slower sales, tighter settlement timing, dearer finance, more nervous lenders. More than 1,500 construction businesses went under in NSW in the 2025/26 financial year. A rate rise does not create that problem, but it does not help.

So the practical advice from that article applies double today. Know your exposure to your biggest client. Serve your payment claims properly and monthly. Do not let a debt build up while you wait to be a good bloke about it.

Cost pressure does not go away because rates went up

Here is the cruel part. Rate rises are meant to cool demand, but they do nothing about your input costs. House construction costs rose 2 per cent in the June quarter 2026 and are now 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 the trade and materials market stays 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. If any of that is variable, it just went up too. Builders spend so much time thinking about the client's finance that they forget their own.

What to actually do about it

None of this means batten the hatches. Plenty of builders will have a good year. But the ones who do will have made a few deliberate moves.

1. Check your pipeline depth, not your enquiry count. How many weeks of confirmed, contracted, deposit paid work do you have? If the answer is less than about twelve, that is your problem to solve this quarter, not next.
2. Tighten your quote validity periods. If your quotes are open for 90 days in a market where costs and rates both move, you are wearing risk for free. Thirty days is reasonable. Say so on the quote.
3. Get your rise and fall or price adjustment clause right. Many residential contracts are fixed price and that is what clients want. If you are fixed price, your contingency has to be real, not optimistic.
4. Follow up dead quotes properly. A client whose borrowing capacity dropped is not gone. They are waiting. A call in six weeks saying you have had a cancellation and could fit a smaller scope in is worth more than ten new leads.
5. Sell the smaller job. When capacity tightens, renovations and alterations often hold up better than new builds, because the borrowing required is smaller. If you only do new builds, that is a narrow door in a tightening market.
6. Watch your progress claims and get paid on time. In a tightening market, everyone above you stretches their payment terms. Do not fund somebody else's cash flow problem.
7. Talk to your own broker or accountant. Not just about the house. About plant finance, the overdraft and whether any of it is worth fixing or restructuring.
8. Keep a proper contract in place on every job. 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 say it. A tightening cycle is not the end of the world for the industry.

NSW is well behind its housing targets and the underlying demand for homes has not gone anywhere. The state government is pushing hard on approvals reform, the new Development Coordination Authority, and prefabrication and modern methods of construction. Public infrastructure work is still substantial and largely unaffected by household borrowing capacity. Population growth has not stopped.

When rates eventually turn, the pipeline of deferred work comes back all at once, into an industry that has lost capacity in the meantime. Builders who are still standing, still licensed and still have their trade relationships intact are the ones who cash in on that.

The job right now is to be one of the ones still standing.

Frequently asked questions

What is the RBA doing today?

The Reserve Bank hands down its decision at 2.30pm AEST on 29 September 2026. The cash rate going into the meeting is 4.35 per cent, and markets have priced a quarter point rise to 4.60 per cent at better than 90 per cent, with all four major banks forecasting a rise. A move to 4.60 would be the highest cash rate since November 2011.

How much does a 0.25 per cent rate rise cost a borrower?

On a $600,000 variable loan at around 6 per cent over 30 years, a quarter point adds roughly $97 a month, or about $1,164 a year, assuming the lender passes on the full rise. On $750,000 it is about $121 a month and on $1 million about $162 a month.

How do interest rate rises affect the construction industry?

Mostly through borrowing capacity rather than repayments. When rates rise, clients can borrow less on the same income, so projects get downsized or deferred. Developer feasibility also tightens, because finance costs more while end values soften, so projects get shelved before builders ever hear about them. The effect shows up in approvals and commencements six to twelve months out, not immediately.

Will building work dry up in NSW?

Not dry up, but slow. The National Housing Supply and Affordability Council has said softer sentiment and recent rate rises are likely to see some housing construction deferred, and NSW Budget papers noted higher rates are expected to lower the pace of growth in dwelling investment. Underlying housing demand and a large public infrastructure pipeline remain.

What should builders do when interest rates rise?

Check how many weeks of contracted work you actually have, shorten your quote validity periods, make sure your contingency is real if you are fixed price, follow up quotes that went quiet, be willing to sell smaller scopes, stay on top of progress claims, and review your own plant and business finance.