The RBA raised the cash rate by 25 basis points at its May 2026 board meeting — a decision described as "knife-edge" because the board was closely split. The cash rate now sits at 4.35%, the highest since 2012. Here's what happened, what it actually costs you, and what to do about it.
Why Did the RBA Hike in May 2026?
The RBA's May 2026 statement identified three main drivers:
- Services inflation remains above target — housing costs, insurance, utilities and childcare are all still rising at rates above the 2–3% target band
- Labour market is too tight — unemployment remains below 4%, wages growth is running at ~4% annually, which the RBA believes sustains inflationary pressure
- Goods disinflation has stalled — the downward pressure from normalising global supply chains has largely played out; further falls in goods prices are unlikely to offset services
The board was split. The minority argued that rate hikes to date have already done enough damage to household spending and that further tightening risks unnecessary recession. The majority won — but acknowledged the decision could go either way at the next meeting depending on data.
Next RBA meeting
The next RBA board meeting is scheduled for May 2026. The board will assess Q1 CPI data (released late April) and employment data before deciding. Markets currently price a 40% probability of another hike and 60% hold — the decision remains genuinely uncertain.
How Much Does This Add to Your Repayments?
The 25bp hike adds the following to monthly repayments for variable rate borrowers:
| Outstanding Loan | Monthly Increase | Annual Increase |
|---|---|---|
| $400,000 | +$67/mo | +$804/yr |
| $600,000 | +$100/mo | +$1,200/yr |
| $700,000 | +$117/mo | +$1,404/yr |
| $850,000 | +$142/mo | +$1,704/yr |
| $1,000,000 | +$167/mo | +$2,004/yr |
To put this in context: since the RBA began hiking in May 2022, a $700,000 variable rate mortgage has increased by approximately $1,200/month in total. This March hike is the latest increment in that cumulative impact.
What Should You Do Right Now?
If You're on a Variable Rate
Your repayments will increase automatically. But the more important question is: are you already overpaying compared to what's available? Many existing borrowers are on rates 0.5–1% above what new customers can access. If you refinance now — even before any further hikes — you may save more than the hike costs you.
If Your Fixed Rate is Expiring
Hundreds of thousands of Australian fixed rate loans taken out in 2021–2022 at 1.9–2.5% are expiring this year and rolling onto variable rates of 6%+. If yours is expiring in the next 6 months, don't wait — speak to a broker now to understand your options before you're automatically placed on the standard variable rate.
Compare Rates After the RBA Hike
Post-hike, the spread between lenders is wider than ever. We compare your options across 30+ lenders in minutes and find the best rate for your situation.
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If You're Planning to Buy
A rate hike reduces your borrowing power by approximately 2–3% per 25bp increase. On a $150,000 household income, this March hike reduces borrowing capacity by approximately $10,000–$15,000. The APRA buffer (assessed at current rate + 3%) amplifies this. Recalculate your actual borrowing power before committing to a purchase price — don't rely on a pre-approval issued more than 3 months ago.
Should You Fix Your Rate Now?
This is the question everyone is asking. The honest answer is more nuanced than "yes" or "no":
- Fixed rates have already priced in future hikes — a 3-year fixed rate today of ~6.5–6.9% already reflects market expectations of where the cash rate goes. You're not "getting ahead" of future hikes by fixing.
- Variable rates are currently lower — most competitive variable rates sit at 5.8–6.3%, below fixed rate options. If rates don't rise further (or fall), variable wins.
- Fixing provides cash flow certainty — if knowing your repayments exactly is worth the premium to you, fixing part of your loan (a "split") is a reasonable middle ground.
Don't try to predict the RBA. Make the decision that lets you sleep at night and service your loan comfortably in a range of scenarios.
Find Your Best Rate Post-Hike
Post-RBA hike is the best time to review. Lenders are actively competing for refinancers. We find the best option for your situation — variable, fixed, or split.
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