RBA Raises Cash Rate to 3.85% — What Australian Borrowers Need to Know Right Now
In February 2026, the Reserve Bank of Australia (RBA) made its first interest rate hike in over two years, lifting the official cash rate by 0.25% — from 3.60% to 3.85%. While the move surprised many borrowers who had expected rates to remain stable, property market experts say the Australian housing market is showing strong resilience. Here’s a clear breakdown of what’s happening and what you should do next.
How Much More Will You Pay Each Month?
The immediate question for most homeowners is: how does this affect my repayments? The impact depends on your loan size:
- $500,000 loan: approximately $80 more per month
- $700,000 loan: approximately $105 more per month (total monthly repayment around $4,412)
Economists at CBA and NAB are also flagging a potential second 0.25% increase in May 2026 as the RBA continues its fight against persistent inflation. If you’re on a variable rate mortgage, now is a critical time to review whether your current loan is still the right home loan for your needs.
Why the RBA Raised Rates
The RBA cited “stubbornly high inflation” as the key driver of the February hike. However, experts note this is a very different environment from the rapid tightening cycle of 2022-23, when rates surged from 0.10% to 4.35%. Starting from 3.60%, an extra 25 basis points places far less additional pressure on household budgets. That said, inflation shows no clear signs of easing in the near term, making it important for borrowers to plan proactively.
Housing Market Outlook: Resilient Despite Rate Pressures
Despite the rate hike, Australia’s property market is demonstrating remarkable strength:
- Residential listings remain approximately 20% below the five-year average
- New dwelling construction is running 25-30% below the federal Housing Accord trajectory
- Auction clearance rates returned strongly from the summer break, outpacing the same period in 2025
- Property market confidence sits at 7.3 out of 10 for Q1 2026
- Western Australia, Queensland, and South Australia are leading on confidence and price growth
What Should You Do Now?
- Review your variable rate loan: Check what your lender is charging and compare it to current market offerings.
- Consider a split loan: Splitting between fixed and variable rates can provide certainty on part of your repayments while retaining flexibility.
- Don’t wait on refinancing: If you haven’t reviewed your mortgage in the past 12-24 months, a personalised assessment could reveal significant savings opportunities.
- Speak with a mortgage broker: A qualified broker can compare hundreds of loan products and find the right home loan for your specific situation, goals, and income.
Need personalised assistance?
Contact Daniel Nguyen, Mortgage Broker at Finance Hub and Networks.
📞 0430 11 11 88
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