The Reserve Bank of Australia has delivered back-to-back rate hikes in 2026, completely reversing three rate cuts from 2025. The cash rate is back at 4.10% - exactly where it was before the easing cycle began.
If you own investment property or you’re planning to buy, here’s what’s happening, why it matters, and what you should be doing about it.
What happened
The RBA delivered three rate cuts through 2025, then completely reversed course in 2026.
2025: Three cuts
| Date | Move | Cash rate after |
|---|---|---|
| February 2025 | -0.25% | 4.10% |
| May 2025 | -0.25% | 3.85% |
| August 2025 | -0.25% | 3.60% |
By August 2025, the cash rate sat at 3.60% - the lowest since April 2023. Markets were pricing in further cuts. Borrowers were breathing easier. Property prices were accelerating.
2026: Two hikes (and counting)
| Date | Move | Cash rate after |
|---|---|---|
| February 2026 | +0.25% | 3.85% |
| March 2026 | +0.25% | 4.10% |
February 2026. The RBA shocked the market with a 25 basis point hike, the first increase since November 2023. The decision was unanimous.
March 2026. Another 25 basis point hike to 4.10%. This time the board was divided: five members voted to raise, four voted to hold. The split tells you the RBA isn’t on autopilot - each meeting is a genuine decision.
The net result: every single cut from 2025 has been reversed. The cash rate is back to exactly where it was before the easing cycle began.
Why the RBA changed direction
The short answer is inflation.
After falling through much of 2024 and early 2025, the Consumer Price Index annual change climbed back to 3.7% as of February 2026. The RBA’s target band is 2-3%. At 3.7%, we’re well above where the RBA needs inflation to be.
The primary driver has been fuel prices. The conflict in the Middle East has disrupted global oil supply, and that’s flowing directly into transport costs, food prices, and the general cost of living. Unlike demand-driven inflation (which rate hikes can directly suppress), supply-side inflation from geopolitical events is harder for central banks to control.
The RBA’s judgment: even though the inflation is partly supply-driven, leaving rates too low risks inflation expectations becoming entrenched. They’d rather act now than let the problem get worse.
What’s next for rates
The next RBA meeting is 4-5 May 2026, with the decision announced at 2:30pm AEST on 5 May - one week before the federal budget.
Here’s where the major forecasters stand:
CBA, NAB, and ANZ all expect another 25 basis point hike in May, taking the rate to 4.35%. That would be three consecutive hikes - the first time since mid-2023.
Westpac has the most aggressive forecast: hikes in May, June, and August, pushing the cash rate to 4.85% - an 18-year high.
Morgans has asked whether four hikes in 2026 is a realistic scenario.
The split decision in March (5-4) suggests the May meeting is genuinely uncertain. If inflation data softens between now and then, a pause is possible. The next CPI update is due 29 April 2026 - just days before the RBA meets. That number could swing the decision.
Consumer inflation expectations have also jumped to 6.9% (ANZ-Roy Morgan, mid-March 2026), up 1.6 percentage points from February. The RBA specifically flagged rising expectations as a risk. If expectations stay elevated, the case for further tightening strengthens.
What it means for mortgage repayments
The average variable mortgage rate is now around 5.50%, with the most competitive rates starting from about 5.08%. On the average new home loan of $736,257, here’s what the rate moves mean:
| Cash rate | Approx. variable rate | Monthly repayment (30yr, $736K) | Annual cost |
|---|---|---|---|
| 3.60% (Feb 2025) | 5.00% | $3,951 | $47,412 |
| 3.85% (Feb 2026) | 5.25% | $4,064 | $48,768 |
| 4.10% (Mar 2026) | 5.50% | $4,178 | $50,136 |
| 4.35% (if May hike) | 5.75% | $4,294 | $51,528 |
That’s an increase of roughly $340 per month ($4,116 per year) if rates go from the February 2025 low to 4.35%. For an investment property, that directly impacts your cash flow and the gap between rental income and holding costs.
How it affects borrowing capacity
Each 0.25% rate increase reduces borrowing capacity by roughly $12,000 for a single income borrower or $24,000 for a couple. The cumulative impact of the two 2026 hikes is approximately $25,000 less capacity for a single borrower or $49,000 for a dual-income couple. If the May hike proceeds, that total approaches $54,000 for a median household.
Banks assess serviceability at the loan rate plus a 3% buffer (APRA requirement). So assessment rates are now running at 9-11%, which is the real constraint on what you can borrow.
New APRA rule (February 2026): Lenders must now limit loans with a debt-to-income ratio of 6x or above to no more than 20% of new lending. This adds another borrowing constraint on top of the rate hikes, particularly for investors carrying multiple mortgages.
If you’re planning to purchase, get your pre-approval updated. A pre-approval from three months ago may no longer reflect your actual borrowing capacity.
What’s happening to property prices
Despite the rate hikes, property prices have continued to rise in most markets.
The national median dwelling value reached $922,838 in February 2026, up 9.9% year-on-year. But the story varies significantly by city:
| City | Monthly growth (Feb 2026) | Annual growth |
|---|---|---|
| Perth | +2.3% | +24.8% |
| Brisbane | +1.6% | +19.0% |
| Adelaide | +1.3% | +15.3% |
| Hobart | +1.2% | +11.9% |
| Sydney | Flat | +6.7% |
| Melbourne | Flat | +5.2% |
Regional markets have been outperforming capital cities, with combined regional dwelling values up 11.1% year-on-year to a median of $751,327.
The reason prices keep rising despite higher rates is simple: there aren’t enough homes. Australia is forecast to fall approximately 262,000 homes short of its 1.2 million homes target. National vacancy rates have tightened to just 1.1% (down from 1.3% a year ago), with Perth at 0.6%, Brisbane at 0.8%, and Adelaide at 0.8%. Rents nationally are up 6.6% year-on-year, with the average capital city rent now $783 per week.
You can’t push prices down with rate hikes when the fundamental problem is a shortage of supply. And for investors, rising rents partially offset the impact of higher interest costs.
For investors buying in high-growth markets like Brisbane, Perth, and regional centres, the supply-demand dynamics are still firmly in your favour despite the higher rates.
What investors should do
If you already own investment property
Check your cash flow. Model your holding costs at the current 4.10% and at 4.35% (potential May hike). Know exactly how much headroom you have between rental income and expenses. If you’re negatively geared, understand how that deduction works and what it saves you at tax time.
Don’t sell because of rate hikes. Property is a long-term asset. Selling because of a short-term rate cycle means crystallising your position at potentially the worst time. If you bought well - good location, strong fundamentals - the math still works over a 10+ year hold.
Review your loan structure. If you’re on a variable rate, check whether fixing a portion makes sense. Fixed rates offer certainty, but they also lock you in. Talk to your broker about split loan options.
If you’re looking to buy
Get pre-approved now. Borrowing capacity is shrinking with each hike. Getting pre-approval locks in your assessed capacity at current rates, giving you a window to purchase.
Focus on yield. In a higher-rate environment, cash flow matters more. Properties with strong rental yield help offset higher holding costs. Markets like Adelaide, regional QLD, and Geelong tend to offer better yield than Sydney or Melbourne.
Don’t try to time rates. Nobody predicted the RBA would be hiking in 2026. If the property is right - strong location, good yield, solid growth fundamentals - the difference between buying at 4.10% and 4.35% is marginal over a 20-year hold. The cost of waiting and missing price growth often exceeds the cost of a slightly higher rate.
If you’re a first-time investor
Start with the fundamentals. Rates go up and rates come down, but the principles of property investment don’t change. Location quality, supply constraints, population growth, and infrastructure investment are what drive long-term returns.
The Help to Buy scheme launched in December 2025 and may be relevant if you’re looking at owner-occupier properties first. It doesn’t apply to investment properties, but it can help you get into the market.
The bigger picture
Rate hikes feel painful in the moment. But Australia has been through multiple rate cycles, and property values have continued to climb over every 10-year period in modern history. The investors who do well are the ones who buy based on research, hold through cycles, and don’t make emotional decisions when rates move.
The chronic housing undersupply in Australia is the dominant force in the market right now. Until that changes - and it won’t change quickly given building approvals are still falling - property values in well-located areas have structural support regardless of what the RBA does in any given month.
If the RBA hikes again in May, we’ll update this analysis. If they pause, we’ll cover that too. Either way, the approach is the same: buy well, hold long, and let the fundamentals do the work.
This is general information only and not financial advice. Interest rates and lending criteria change frequently. Speak to a qualified mortgage broker about your specific borrowing situation.
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