Higher rates, higher rents? If only it were that simple

Another rate rise. Another deep breath from property investors.

With five RBA rate hikes so far in 2026, you could forgive an owner for looking at their mortgage repayment and thinking: “Perhaps the rent needs to go up too.”

Understandable? Yes. Straightforward? Not quite.

The bank does not wait for your next rent review. And the rental market is not especially interested in what your mortgage costs.

That is what has me wondering whether the conversation about interest rates and rents needs a little more room for another perspective.

The mortgage and the rent run on different timetables

In most States and Territories, including NSW, rent increases for an existing tenancy are generally limited to once every 12 months, with further written notice periods.

So, imagine you increased the rent in October. Your lender raises your variable mortgage rate in November. Your costs go up, but the rent stays put... potentially for many months.

When the next review finally arrives, the market might not support another increase anyway.

None of this is an argument against tenant protections. Knowing what your rent will be matters, and tenants have plenty of financial pressures of their own.

It is simply a reminder that a higher mortgage bill does not come with a matching increase in rental income. For strata owners also budgeting for levies, insurance and maintenance, that gap can be uncomfortable.

Your mortgage does not set the rent

The RBA’s own research found little evidence that landlords directly pass higher mortgage interest costs on to tenants. The study used older data, so it is not the final word on today’s market, but its main finding is worth considering.

Think of it this way: you might need $800 a week to make your investment stack up. But if a similar apartment down the road is available for $750, prospective tenants are unlikely to pay the extra just because your repayments have risen.

They are comparing homes, not mortgages.

That is why some of the feedback I am hearing is interesting. Property managers describe quieter enquiries for certain properties and tenants more willing to move rather than accept an increase. Some mortgage brokers are reporting fewer new lending enquiries too.

These are local observations, not proof of a nationwide slowdown. Still, broader rental data also suggests some easing: Cotality reported slower national rental growth in the September quarter, although rents were still rising overall.

Perhaps some tenants are getting a little more choice. That is not the same as saying renting has suddenly become easy.

What about migration?

Australia’s migration outlook is changing too, with the government forecasting lower net overseas migration under changes outlined in September.

Slower population growth could mean fewer additional households competing for rentals than we would otherwise see. It does not mean empty apartments everywhere or rents automatically falling.

There is another wrinkle: Australia also needs skilled people to help build more homes. The mix of migrants matters, not just the total number.

And people who put off buying because borrowing is too expensive may stay in the rental market longer.

So, even here, the story is not quite “less migration, cheaper rent”. Wouldn’t it be convenient if housing were that simple?

A question, not a prescription

I do not envy the RBA’s job. It has to consider the whole economy, not just the apartment an investor is trying to hold onto.

But markets change, sometimes one suburb or one property type at a time.

Owners can face rising costs while tenants struggle with affordability. Rental growth can slow without rents actually falling. This does not have to be a contest over who has it worse.

I am not suggesting an easy fix. Just that “higher rates mean higher rents” leaves rather a lot out. If some rental markets are starting to soften, could the next chapter look different from the one we have become used to?

Let's leave setting cash rates to the RBA but if you have a strata related concern, our experienced team at Compass can point you in the right direction.