Tomorrow, Monday 26 October 2026, the State Bank of Pakistan will decide its policy interest rate. For anyone buying a house, taking a home loan, or selling a property, that decision is about their monthly budget. One decision tomorrow will feed through to KIBOR, to bank lending rates, and to what a buyer can afford to pay for your home.
What is expected, and why a hike is on the table
The policy rate has been unchanged at 11.5 percent since April 2026. At its last meeting on 14 September, the Monetary Policy Committee held the rate, citing uncertainty from the Middle East conflict, higher commodity prices, and supply chain disruptions.
The case for a hike is inflation. Headline inflation was in double digits in five of the past six months, well above the State Bank's 5 to 7 percent target range. It rose to 11.1 percent year on year in August, from 9.2 percent in July, then eased to about 10.3 percent in September. Core inflation has stayed near 8.7 percent, and October inflation is expected near 10 percent.
What a hike does to your monthly payment
The policy rate is not your home loan rate, but it sets the direction. Commercial home loans are priced off KIBOR plus a bank spread, putting October 2026 commercial home finance at roughly 15.7 to 16.7 percent a year. When the policy rate rises, KIBOR tends to follow, and variable rate borrowers feel it.
Take an illustrative loan of Rs. 6 million over 20 years. At 12 percent a year, the monthly instalment is about Rs. 66,065. At 12.5 percent, it is about Rs. 68,168. That is roughly Rs. 2,100 more every month for the same house and the same loan. But half a percentage point is not small when multiplied by 240 monthly payments.
There is one large exception. The government's Apna Ghar programme, also called Ghar Ho Tu Apna, lends up to Rs. 10 million at a fixed 5 percent for the first 10 years, with a 10 percent down payment, for a house of up to 10 marla or a flat of up to 1,500 square feet. That fixed rate does not move when the policy rate moves. Officials reported in mid October that 75,198 Apna Ghar loans worth Rs. 448 billion had been approved, though only Rs. 76 billion had reached 14,000 recipients. Start early.
What it means for property prices
Higher rates cool leveraged demand. Buyers who need a commercial loan can borrow less, or pay more each month for the same loan, so some will pause or negotiate harder.
But a hike does not hit every property equally. Construction grew 19.2 percent in the first quarter of FY26, and money that used to flow to Dubai property has been redirected home. That inflow pushed prices in Karachi's Defence area up by as much as 60 percent, then corrected them by up to 20 percent within a month. Momentum prices correct, while ready, possession holding property in approved societies holds up because end users still need homes.
Expect the same split after tomorrow. Finished, possession ready homes in populated, managed locations should stay the most resilient, because cash and scheme buyers are less rate sensitive. Paper files in unapproved schemes with no possession timeline are the most exposed.
Buyers and sellers: what to do
Buyers, do not rush a purchase to beat a decision you cannot predict. Buying the wrong property quickly is far more expensive than paying Rs. 2,100 more a month on the right one. Get your financing in writing before you negotiate: Apna Ghar eligibility, your bank's actual offered rate, whether it is fixed or variable, and early repayment terms. Then test affordability at a rate half a point higher than today's offer.
Above all, buy verified. Check the title, confirm the society's NOC, and match the seller's identity to the documents. A rate decision changes your payment. A bad title can cost you the property.
Sellers, do not panic, and do not chase the last peak price. The buyers who remain active after a hike are the serious ones: cash buyers, scheme eligible buyers, and end users buying to live in the home. Price realistically and make verification easy. A clean file and a verified owner will do more for your sale than holding out for a price the market has moved past.
Frequently asked questions
Will the State Bank raise interest rates on 26 October 2026?
Most market participants expect it. In the Topline Securities survey, 61 percent expected a hike, with 54 percent expecting 50 basis points to 12 percent, while 39 percent expected no change.
Does a rate hike change my 5 percent Apna Ghar loan?
No, not in the first 10 years. The Apna Ghar rate is fixed at 5 percent for the first 10 years, then becomes market linked at KIBOR plus 3 percent. Commercial variable rate loans, by contrast, do move with KIBOR.
Should I buy property before the 26 October decision?
Only if you have found the right property, verified it, and secured financing you can afford at a rate half a point higher than today's offer. Buying quickly to beat an uncertain decision is how buyers end up with the wrong property.
Will property prices fall if interest rates rise?
Higher rates normally cool leveraged demand and put pressure on prices, especially for speculative assets. Ready, possession holding property in approved societies has historically held up better than paper files.
What should sellers do if rates go up?
Price realistically, lead with verification and possession status, and make the sale easy for serious buyers. A verified direct owner listing stands out against unverified listings in a higher rate market.
The bottom line
Tomorrow's decision will probably move rates up, and a move up will cost variable rate borrowers real money every month. It will not change the fixed 5 percent Apna Ghar rate for its first 10 years, and it will not change the fundamentals: buy ready, buy verified, buy from the actual owner, and never stretch your budget to a point where half a percentage point breaks it.
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