On 5 May 2026, the Reserve Bank of Australia raised the official cash rate by 25 basis points to 4.35% — the third consecutive increase in 2026, carried by an 8-1 majority of the Monetary Policy Board. In doing so, the RBA fully unwound every rate cut delivered during the 2025 easing cycle, which had brought the cash rate from 4.35% down to 3.60% through three cuts in February, May and August 2025.^[1]

Why Did the RBA Move Again?

The RBA’s assessment: inflation had not come down fast enough. After the 2025 cuts, private demand rebounded stronger than expected. Household spending accelerated, the housing market picked up, and businesses began passing on cost pressures to consumers. The Middle East conflict added further fuel through sharply higher global oil and fuel prices, pushing headline inflation materially higher.^[1]

The RBA’s own forecasts project trimmed mean inflation remaining above the 2–3% target band until late 2027, returning to the midpoint only by mid-2028. The May Board minutes confirmed members assessed that financial conditions at 4.10% were ‘not sufficiently restrictive’.^[3]

What Does 4.35% Mean For Borrowers?

The cumulative impact of 2026’s three hikes is material. For a borrower with a $700,000 home loan over 30 years, a 0.75% rise in the variable rate adds approximately $330–$350 per month to repayments — on top of any strain already carried from 2022–2023.^[4]

  Rate Impact Snapshot — $700,000 Loan, 30-Year Term

  Pre-2026 average variable rate: ~5.51% p.a.

  Post-3-hike average variable rate: ~6.26% p.a.

  Estimated monthly repayment increase: ~$330–$350/month

  Cumulative extra annual cost: ~$3,960–$4,200/year

  Source [4]: Aussie Home Loans / Canstar analysis, March 2026. Indicative only.

Both the February and March 2026 hikes were passed on in full by all major banks. The May hike was similarly passed through. The June 2026 meeting resulted in a unanimous hold at 4.35%, though with explicitly hawkish language about further moves ‘if required’.^[3]

What Happens Next?

Bank forecasts diverge significantly. NAB expects no further hikes and forecasts a gradual easing cycle reaching 3.6% by end-2027. ANZ expects the cash rate to hold at 4.35% through to end-2027. Westpac forecasts two further hikes in August and September. CBA has withdrawn its earlier forecast for late-2026 cuts.^[6]

Despite the higher rate environment, lender competition remains active. Eleven lenders — including ING, BOQ, Community First and Queensland Country Bank — have reduced at least one variable rate since the May hike to attract new borrowers.^[6]

My advice: If you’re on a variable rate and haven’t reviewed your loan in the past 6 months, now is the time. The gap between your existing rate and a competitive new-customer rate may be costing you significantly more than you realise.

Sources

All sources were accessed in late June and early July 2026. Inline references in the body of this blog correspond to the numbered sources below.

[1] RBA Official Media Release — 5 May 2026 Rate Decision Reserve Bank of Australia. Statement by the Monetary Policy Board. Decision to raise cash rate by 25bp to 4.35%, voted 8-1. rba.gov.au/media-releases/2026/mr-26-12.html

[2] ClearTax.com.au — SMSF Borrowing Banned: What the New Rules Mean for You Overview of LRBA ban announced 23 June 2026, Greens deal, bare trust mechanics, implementation timeline and government figures. cleartax.com.au/tax/news-and-updates/smsf-borrowing-banned

[3] Trading Economics — Australia Interest Rate / RBA June 2026 Summary Unanimous hold at June 2026 meeting; May 2026 Board minutes analysis; ‘not sufficiently restrictive’ assessment. tradingeconomics.com/australia/interest-rate

[4] Hudson Financial Planning — SMSF Property Loan Ban 2026 SMSF CGT exclusion from discount changes confirmed; concessional super tax rates retained; LRBA implementation timeline. hudsonfinancialplanning.com.au

[5] Holding Redlich — Federal Budget 2026-27: Three Tax Changes Reshaping Investment, Trust Structures and Business Planning Authoritative legal analysis of trust reforms including triple-impact on trust-held residential property, testamentary trust exclusions, rollover relief, state stamp duty warnings, and government preference for institutional capital. holdingredlich.com

[6] NAB Business — 2026 Federal Budget: What It Means for Individuals 30% minimum discretionary trust tax announcement; 900,000 family trusts potentially affected; trust exclusions; widely held trust carveout. business.nab.com.au