The Reserve Bank of Australia's cash rate directly affects what you pay on a variable rate home loan. Here's how it works, what's happened in 2026, and what to expect next.
When the RBA changes the cash rate, banks typically pass the change through to variable rate mortgage holders within days to weeks. A 0.25% increase on a $600,000 variable rate loan adds approximately $95-100 to monthly repayments. The pass-through isn't always exact — some lenders absorb part of the change, others pass on more.
Fixed rate loans are not directly affected by cash rate changes during the fixed period. However, the rates offered on new fixed loans reflect market expectations of future cash rate movements — so fixed rates often move ahead of actual RBA decisions.
After cutting rates three times in 2025 (bringing the cash rate down to 3.60%), the RBA reversed course in early 2026:
| Date | Decision | Cash Rate | Driver |
|---|---|---|---|
| Feb 2025 | Cut 0.25% | 4.10% | Inflation moderating |
| 2025 (subsequent) | Further cuts | 3.60% | Easing cycle through mid-2025; held at 3.60% from August 2025 |
| 4 Feb 2026 | Hike 0.25% | 3.85% | Inflation re-accelerating |
| 18 Mar 2026 | Hike 0.25% | 4.10% | Middle East energy shock; 5-4 split vote |
| 6 May 2026 | Hike 0.25% | 4.35% | March-quarter CPI 4.6%; 8-1 split vote |
The March 2026 decision was notably close — a 5-4 split vote — but the May 2026 decision was firmer at 8-1, with only one Board member voting to hold. The cash rate now sits back at the 2023 cycle peak. The next meeting is on 15-16 June 2026 with the announcement at 2:30pm AEST on 16 June.
Two primary factors are pushing rates up in 2026. First, the Middle East conflict has disrupted global oil supplies, sending energy prices sharply higher and pushing both actual inflation and inflation expectations up. Second, Australia's labour market remains tight with low unemployment and persistent wage growth, keeping domestic demand stronger than the RBA would like.
Headline CPI inflation ran at 4.6% in the March 2026 quarter, well above the RBA's 2-3% target band. The Board has signalled inflation is likely to remain above target for some time, leaving the door open to further hikes.
The most practical steps for mortgage holders in a rising rate environment:
For ongoing RBA meeting coverage and updates, see SortedAus, which tracks every RBA decision and its practical implications.