RBA Decision — 5 May 2026
Decision: +25bp hike | New cash rate: 4.35% | Previous rate: 4.10% | Highest since: late 2011 | Hikes in 2026: three (Feb, Mar, May) | Next meeting: 15–16 June 2026
The Reserve Bank of Australia has raised the cash rate by 25 basis points to 4.35%, effective from tomorrow. This is the third consecutive increase in 2026, following hikes in February and March that together lifted the rate from 3.60% to 4.10%. The decision was widely anticipated — 30 of 33 economists surveyed by Reuters had forecast today's move, and market pricing had been running at approximately 75% probability of a hike following the March quarter CPI result of 4.6% headline and 3.3% trimmed mean. Variable rate borrowers will see lenders pass on the increase — most major banks announce within 24–48 hours and apply the change within one to two weeks.
What the RBA Said
The Board's post-decision statement said:
"Higher fuel prices are adding to inflation and there are indications that this is likely to have second-round effects on prices for goods and services more broadly."
The Board assessed that "inflation is likely to remain above target for some time and that the risks remain tilted to the upside," citing confirmed capacity pressures in the economy and the ongoing impact of Middle East conflict on fuel and commodity prices. The vote was 8–1 in favour of the increase.
The Impact on Your Repayments
Lenders are required to pass on RBA rate movements to variable rate customers, and most do so within a few business days. If your loan is variable rate, expect your repayment to increase by the amounts below from your next direct debit.
Repayment Change — 4.10% to 4.35% (Today's Hike)
25-year principal-and-interest loan. Approximate figures — actual repayments vary by lender and remaining term.
| Loan balance | Before (4.10%) | After (4.35%) | Extra/month |
|---|---|---|---|
| $500,000 | $2,667 | $2,740 | +$73/mo |
| $700,000 | $3,734 | $3,836 | +$102/mo |
| $900,000 | $4,800 | $4,931 | +$131/mo |
| $1,000,000 | $5,334 | $5,480 | +$146/mo |
The Full Picture: Three Hikes Since January 2026
Today's increase is the third hike in three months. Viewed in isolation, each 25bp move looks manageable. Viewed cumulatively, the picture for borrowers is more significant — the cash rate has risen 75 basis points since the start of the year.
Cumulative Repayment Increase — January 2026 (3.60%) to Today (4.35%)
25-year P&I loan. Approximate figures.
| Loan balance | Jan 2026 (3.60%) | Now (4.35%) | Total increase |
|---|---|---|---|
| $500,000 | $2,530 | $2,740 | +$210/mo |
| $700,000 | $3,541 | $3,836 | +$295/mo |
| $900,000 | $4,552 | $4,931 | +$379/mo |
| $1,000,000 | $5,058 | $5,480 | +$422/mo |
A borrower with a $700,000 loan is now paying $295 more per month than they were at the start of 2026 — that is $3,540 more per year.
Is This the Last Hike?
The RBA's statement was notably more cautious on forward guidance. Rather than signalling further tightening, the Board noted that "having raised the cash rate three times, monetary policy is well placed to respond to developments" — a deliberate shift toward a data-dependent, wait-and-see stance. The Board will be "attentive to the data and the evolving assessment of the outlook and risks" before deciding on future moves.
That does not mean rates have peaked — inflation at 4.6% headline and 3.3% trimmed mean remains well above the 2–3% target band. But the language suggests the Board is no longer pre-committing to further hikes. The next significant data points are the May labour force figures (due mid-June) and the June quarter CPI (due late July). The June meeting on 17–18 June is now live but not a foregone conclusion.
What Borrowers Should Do Now
- Check when your lender passes on the increase. Most major banks announce their variable rate change within 24–48 hours of the RBA decision and apply it within 2–5 business days. Watch your email and your bank's website for the announcement.
- Review your rate — not just the hike, but the total. The question is not just whether your lender passed on today's 25bp. It's whether your current rate is competitive. With three hikes baked in, lenders are still competing hard for refinancing business. A broker comparison could save you significantly more than the cost of today's increase.
- Model your budget at the new rate. Use our repayment calculator to confirm your new repayment figure and check that your monthly cash flow is still comfortable. If there's pressure, act sooner rather than later.
- Reconsider fixing — or splitting. If you have been weighing up fixing part of your loan, banks will update their fixed rate pricing quickly after today's decision. Fixed rates reflect market expectations of future cash rates — if the forward curve shifts following the RBA's statement, fixed pricing will move. Read our fixed vs variable guide for a framework.
- Don't wait for it to hurt before you call. The borrowers who get the best outcomes are the ones who act in the days following a rate decision — not three months later when they're already under pressure. A free broker review takes 20 minutes and could result in a lower rate that more than offsets today's hike.
Written by Amit Narang, Mortgage Broker | Credit Representative 558902 of Outsource Financial Pty Ltd (ACL 384324)
Sources: RBA, "Statement by the Reserve Bank Board — May 2026"; RBA, "Cash Rate Target"; ABS, "Consumer Price Index, Australia, March Quarter 2026."
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