After three rate rises in 2026 took the cash rate to 4.35 percent, the Reserve Bank has hit pause, leaving borrowers a moment to catch their breath. But the question now dominating the property market is what happens next, and on that, even the experts can’t agree. Here’s where things stand ahead of the RBA’s August meeting and what it means for anyone with a mortgage.
Where Things Stand
The RBA has held the cash rate steady at 4.35 percent, having raised it three times earlier in 2026, in February, March, and May. Those increases effectively unwound all of the cuts delivered through 2025, and the major banks all passed on the full increases to variable-rate customers within days.
The central bank’s message with the pause was measured: inflation remains a concern, the economy is slowing, and it wants to assess how the earlier rate rises flow through before doing anything more. Critically, it has not ruled out further increases if inflation stays stubborn.
The Banks Are Divided
This is where it gets genuinely uncertain. The major banks hold sharply different views on the next move. Commonwealth Bank, NAB, and ANZ broadly expect the RBA to leave the cash rate unchanged for the rest of this year, with cuts not arriving until 2027. Westpac sits at the other end, forecasting two further hikes in August and September before any cuts. That’s an unusually wide split, and it reflects genuine uncertainty about which way the economy tips next.
The Wildcard: Unemployment
Part of what’s complicating the picture is the labour market. Australia’s unemployment rate rose to 4.5 percent in recent data, the highest since November 2021. A softening jobs market typically argues for rate cuts, even as still-elevated inflation argues the opposite. The RBA is weighing both at once, which is exactly why forecasts diverge so much.
What It Means for Borrowers
For existing borrowers, the practical message is to plan for uncertainty rather than betting on any single outcome. Three hikes have already added meaningful cost: on an average loan, borrowers are absorbing several hundred dollars more per month than at the start of the year. Building a buffer for the possibility of at least one more increase is prudent, even if cuts ultimately come first.
For prospective buyers, the key point is that borrowing capacity has shifted significantly this year, a single-income buyer has lost roughly $36,000 in borrowing power, and a dual-income couple around $72,000. Getting your borrowing capacity reassessed regularly, rather than relying on an older pre-approval, is more important than usual right now.
What to Watch
The next employment data and the RBA’s 11 August meeting will be the key signals. Until then, the cash rate sits on a knife’s edge between an economy that’s slowing and inflation that won’t quite let go.
Epik Wire tracks every RBA decision and what it means for Australian borrowers. Subscribe to our newsletter for updates the day they happen.
