Rate rises: short-stay vs mid-term vs long-term rental

1. What's happened to rates

On 3 November 2026 the Reserve Bank lifted the cash rate to 4.85%, the fifth rise of 2026 and the highest level since November 2008. The major banks passed the full increase on to variable home loans. Across the year that is 1.25 percentage points: on a $600,000 interest-only investor loan, about $7,500 a year (around $625 a month) in extra interest.

The RBA has said another rise is possible. Markets and economists are divided on what comes next, so plan for rates staying higher for a while.

2. Why rate rises affect each strategy differently

Your loan costs the same whichever way you let the property. What differs is the income side, and how quickly it can respond:

• Long-term lease: stable, but in Queensland and NSW rent can generally only be increased once every 12 months, so higher costs take time to pass through.
• Mid-term stays: the rate is set for each stay, so pricing adjusts every few months.
• Short stays: nightly prices can be changed every day with demand, events and seasons.

3. Worked example: a Brisbane apartment before and after 2026's rises

Brisbane 2-bed apartment, $600,000 interest-only loan	Long-term lease	Mid-term (furnished)	Short stays
Income after running and management costs*	$33,500	$34,700	$40,600
Strata levies and base council and water rates (same for all)	−$7,500	−$7,500	−$7,500
Interest at 6.00% (early 2026)	−$36,000	−$36,000	−$36,000
Cash flow before tax, early 2026	−$10,000	−$8,800	−$2,900
Interest at 7.25% (after 2026's five rises)	−$43,500	−$43,500	−$43,500
Cash flow before tax, now	−$17,500	−$16,300	−$10,400

*Long-term and short-stay figures are from our Airbnb vs long-term rent worked example ($750 a week lease; $230 a night at 75% occupancy). Mid-term assumes $1,100 a week furnished for 47 weeks, 15% management, and owner-paid power and internet, furniture, insurance, supplies and cleaning between stays. Stays of 42+ days avoid Brisbane's transitory rates category. Interest rates are illustrative investor variable rates.

What it shows: rate rises push every strategy further into negative cash flow by the same amount. The ranking doesn't change, but the gap matters more. Here, short stays offset almost exactly the extra interest from 2026's five rises. Mid-term letting is slightly ahead of a lease, with fewer turnovers than short stays.

Negative cash flow before tax is common for geared investment properties. Interest and running costs are generally deductible against rental income. Your tax position, and any changes to investor tax settings, are a question for your accountant.

4. In Sydney, the mix matters more

Sydney owners face the same interest bill but a 180-night cap on non-hosted short stays. The strongest result usually comes from combining short stays in peak months with 21-night-plus mid-term stays, which don't count towards the cap. In our Sydney inner-east example, that mix earned about $6,000 a year more than a lease. See mid-term rentals explained.

5. The risks in a high-rate market

• Travel spending can soften when households are under pressure, so short-stay income can be more volatile. Corporate, medical and project-based mid-term demand tends to hold up better.
• Lending: some lenders treat short-stay income differently from lease income when assessing loans. Check with your broker before refinancing or buying.
• Higher costs to set up: short and mid-term letting need furniture and more running costs, which matter more when cash flow is tight.
• Rules can change for short stays. See our Brisbane and Sydney rules guides.

6. What owners can do now

1. Run the numbers three ways for your property: short-stay, mid-term and long-term, after all costs.
2. Keep flexibility. If your lease is due to end, consider whether a furnished or mixed strategy would earn more before signing another 12 months.
3. Review your loan with a broker: rate, offset account, and when any fixed rate expires.
4. Check your deductions with your accountant: interest, management fees, depreciation on furniture and running costs.
5. Use a manager who can switch between short, mid and long-term letting as rates, demand and rules change.

Common questions

How do interest rate rises affect rental property investors?

They increase the interest cost of holding the property. Across 2026's five rises (1.25 percentage points), interest on a $600,000 interest-only loan rose by about $7,500 a year. The cost is the same whether the property is leased or used for short stays, so the difference comes from the income side.

Is Airbnb better than a long-term lease when rates are high?

For a well-located inner-city apartment it usually earns more after costs. In our Brisbane example, short stays earned about $7,000 a year more than a lease, roughly offsetting the extra interest from 2026's rate rises. Short-stay income is more variable, though, and needs more management.

Can I raise the rent to cover higher interest rates?

For a standard lease, rent increases in Queensland and NSW are generally limited to once every 12 months and must follow the notice rules. Short-stay and mid-term rates are set per booking, so they can respond more quickly to costs and demand.

Is mid-term rental a good option in a high-rate market?

It can be. Mid-term stays usually earn somewhat more than a lease, with fewer turnovers than short stays. Corporate and medical demand also tends to be steadier than holiday travel. In Sydney, stays of 21 nights or more don't count towards the 180-night cap.

What is the RBA cash rate now?

The Reserve Bank raised the cash rate to 4.85% on 3 November 2026. It was the fifth increase of 2026 and the highest level since November 2008.

Related: Airbnb vs long-term rent · Mid-term rentals · What management costs. Rates are as at 10 November 2026. This article is general information only and is not financial or tax advice. Speak to your broker, accountant or financial adviser about your own situation.

Last checked: 9 November 2026. This page is general information, not legal or tax advice. Rules change, so confirm the details for your own property with the council, your body corporate or strata manager, and your accountant.