Update, 5 October 2026. This post was written in April, after the first two hikes. A third hike in May took the cash rate to 4.35%. The RBA held in June and August, then lifted it to 4.60% on 29 September. The figures below are updated for that rise. The two holds are covered in what the August hold means for investors.
The Reserve Bank of Australia delivered back-to-back rate hikes in early 2026, completely reversing three rate cuts from 2025. By May the cash rate had reached 4.35%, matching the November 2023 peak. That is exactly where it sat before the first cut of the easing cycle in February 2025.
If you own investment property or you’re planning to buy, these moves change both your repayments and how much you can borrow.
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. Housing prices kept picking up through the rest of 2025. The RBA flagged that when it changed course.
2026: Four hikes and two holds
| Date | Move | Cash rate after |
|---|---|---|
| 3 February 2026 | +0.25% | 3.85% |
| 17 March 2026 | +0.25% | 4.10% |
| 5 May 2026 | +0.25% | 4.35% |
| 16 June 2026 | Hold | 4.35% |
| 11 August 2026 | Hold | 4.35% |
| 29 September 2026 | +0.25% | 4.60% |
February 2026. The RBA lifted the cash rate by 25 basis points, 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 showed the Board was weighing each decision closely.
May 2026. A third consecutive hike, taking the cash rate to 4.35%. The vote firmed up to 8-1, eight in favour and one dissenting hold. The Board’s statement warned of “second-round effects” on prices. The Statement on Monetary Policy lifted its forecast peak for headline inflation to 4.8%, assuming the Middle East conflict is resolved soon. Full breakdown of the decision is in RBA hikes to 4.35%: what the May decision means for investors.
June and August 2026. Two unanimous holds at 4.35%. The Board said it would lift the cash rate again if upside risks to inflation materialise.
September 2026. A fourth hike, taking the cash rate to 4.60%. The decision was unanimous.
The net result: every cut from 2025 has been reversed. The cash rate is now 4.60%, 25 basis points above where it sat before the easing cycle began.
Why the RBA changed direction
The main reason is inflation.
Inflation fell a long way from its 2022 peak, then picked up materially in the second half of 2025. The Consumer Price Index annual change was 3.7% in February 2026 and 4.6% in March. The RBA’s target band is 2-3%. In the 12 months to July 2026, CPI inflation was 3.5% and trimmed mean inflation 3.6%, both still above the band.
The February hike was about capacity pressures, with demand growing faster than the RBA expected. From March, fuel prices added to the problem. The conflict in the Middle East has disrupted global oil supply, and that’s flowing 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.
Part of the inflation is supply-driven. Even so, the RBA judged that leaving rates too low risked inflation expectations becoming entrenched. It would rather act now than let the problem get worse.
What’s next for rates
The Board lifted the cash rate to 4.60% at its 28-29 September 2026 meeting. In its August statement the Board said inflation is not expected to return to around the middle of the target range until late 2027. It added that there are upside risks to that projection. It kept the door open to “increasing the cash rate target further if upside risks materialise.”
Cotality’s September Home Value Index report noted that core inflation came in higher than expected. Short-term measures of inflation expectations have eased but remain higher than earlier in the year, according to the RBA. If expectations climb again, the case for further tightening strengthens.
What it means for mortgage repayments
The average variable rate on new investment loans was 6.4% in July 2026 (RBA table F6). The average new investor loan was $708,000 in the June quarter 2026 (ABS Lending Indicators). On that loan, the rate moves look like this:
| Cash rate | Approx. variable rate | Monthly repayment (30yr, $708K) | Annual cost |
|---|---|---|---|
| 3.60% (Aug 2025) | 5.65% | $4,087 | $49,044 |
| 3.85% (Feb 2026) | 5.90% | $4,199 | $50,388 |
| 4.10% (Mar 2026) | 6.15% | $4,313 | $51,756 |
| 4.35% (May 2026) | 6.40% | $4,429 | $53,148 |
| 4.60% (Sep 2026, current) | 6.65% | $4,545 | $54,540 |
That’s an increase of roughly $458 per month ($5,496 per year) from the 2025 low to today’s 4.60%. For an investment property, that hits your cash flow directly. It widens the gap between rental income and holding costs.
How it affects borrowing capacity
Each 0.25% rate increase cuts the loan a fixed repayment budget can support by about 2.2%. On a $708,000 borrowing limit that’s roughly $15,000 per hike. The four 2026 hikes together cut capacity by about 8.5%, or around $60,000.
Banks assess serviceability at the loan rate plus a 3 percentage point buffer. APRA confirmed that buffer in May 2026. So assessment rates on new variable investment loans now run at around 9.65%. That 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. The limit applies to investor and owner-occupier lending separately. APRA said the recent pick-up in high-DTI lending was driven by investors, so they are the borrowers it would bind first. For the full mechanics of how banks calculate your number in this rate environment, see our borrowing capacity 2026 guide.
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
The rate hikes have now caught up with prices. Cotality’s national Home Value Index fell 0.9% in August 2026, a fifth monthly fall in a row. National values are 3.6% below the March peak. The national median dwelling value is $912,885, still up 2.7% over the year. The story varies significantly by city:
| City | Monthly change (Aug 2026) | Annual change |
|---|---|---|
| Perth | -0.8% | +15.6% |
| Brisbane | -1.0% | +10.8% |
| Adelaide | -0.8% | +8.6% |
| Hobart | -0.2% | +8.1% |
| Sydney | -1.4% | -4.6% |
| Melbourne | -1.1% | -4.7% |
Regional markets have held up better than the capitals. Combined regional dwelling values fell 0.4% in August but are up 7.7% over the year, to a median of $764,020.
What stops a deeper fall is a shortage of homes. The National Housing Supply and Affordability Council expects the 1.2 million homes target to be met in the December quarter 2030. That’s well after the Accord’s five-year window closes in mid-2029.
Rental markets are loosening a little but remain tight. SQM Research’s national vacancy rate was 1.35% in August 2026, up from 1.24% a year earlier. Perth sat at 0.61%, Brisbane at 0.87% and Adelaide at 0.64%. SQM’s national asking rents are up 7.4% over 12 months. The capital city average is now $795 per week.
Rate hikes can cool prices, but they don’t add a single home. 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 long-run supply case still holds. Values in both capitals have fallen over the past three months, so buyers have more room to negotiate.
What investors should do
If you already own investment property
Check your cash flow. Model your holding costs with the cash rate at the current 4.60% and again at 4.85%, in case the Board lifts again. 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 can mean selling at the worst possible time. If you bought well, with a good location and strong fundamentals, the numbers still work 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 shrinks with each hike. A current pre-approval shows what you can borrow at today’s rates, though lenders reassess if rates rise before you buy.
Focus on yield. In a higher-rate environment, cash flow matters more. Properties with strong rental yield help offset higher holding costs. Gross house yields are 2.9% in Sydney, 3.4% in Adelaide and 4.1% in regional Queensland (Cotality, August 2026). Adelaide, regional QLD and parts of Geelong all offer better yield than Sydney.
Don’t try to time rates. In August 2025 the RBA was still cutting, and six months later it was hiking. If the property is right, with strong location, good yield and solid growth fundamentals, a single 0.25% move is marginal over a 20-year hold. On the loan above it’s about $116 a month. Waiting for rates to fall has its own cost if prices recover first. If you want help finding properties that stack up regardless, here’s what a buyers agent costs.
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 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. The investors who do well buy based on research, hold through cycles, and don’t make emotional decisions when rates move.
The chronic housing undersupply is still the force underneath the market. It won’t change quickly, with house construction costs now 51% above pre-pandemic levels. Property values in well-located areas have structural support over the long run, whatever the RBA does in any given month.
Whatever the Board does next, we’ll keep buying well-located property for clients to hold for the long term.
Update May 2026: The March CPI figures, released on 29 April, showed annual inflation of 4.6%, well above the RBA’s target band. We’ve covered the May 2026 rate decision and what it means for investors in a follow-up post.
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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