The RBA held the cash rate at 4.35% on 11 August 2026. Unanimous vote. The board debated whether to hike or hold. A cut was never discussed.
For investors, the rate is not the news. The news is that borrowing capacity has stopped moving. Three hikes in three months followed by two consecutive holds. Assessment rates are stable for the first time since January. That changes the buying equation heading into spring.
What the Board Decided
The Monetary Policy Board voted unanimously to keep the cash rate at 4.35% at the 10-11 August meeting. Governor Bullock confirmed the board weighed only two options: another hike or a hold. No one proposed a cut.
The hold was widely expected. Finder’s survey of 38 economists found 92% predicted no change. But Bullock kept the door open. The board would consider further tightening if inflation tracks well above its forecasts. That wording is narrower than May’s blanket “if needed.” The bar for another hike has risen. It has not been removed.
This is the second consecutive hold after June. The cash rate has sat at 4.35% for three months following three hikes across February, March, and May that added 75 basis points and fully reversed the 2025 easing cycle.
Forty-four percent of economists in the same Finder survey expect at least one more rise before December. Markets are pricing roughly a 50% chance of another hike by year-end.
Inflation Below the May Forecast
The August Statement on Monetary Policy tells a clearer story than the rate decision alone.
Annual headline CPI fell to 3.8% in June, down from 4.0% in May (ABS). Trimmed mean, the RBA’s preferred underlying measure, held at 3.6%. Still above the 2-3% target band. But the trimmed mean came in below the 3.8% the RBA had forecast in its May SoMP. When the central bank’s own projections overshoot the actual number, the case for tightening weakens.
The SoMP now forecasts inflation returning to the midpoint of the target by early 2028. Unemployment is expected to drift higher, reaching 4.5% by December 2026 and 4.8% by late 2028. The labour market is loosening, which takes pressure off wages and eventually prices.
The RBA also noted that housing prices have declined “somewhat more than expected.” Weaker housing feeds into household wealth and spending, which helps slow the economy the way rate hikes are supposed to. The question is how many more months the board needs to see before cutting.
Capacity Has Stopped Shrinking
This is where the hold changes things.
The three 2026 hikes shaved roughly 7% off investor borrowing capacity from January levels. Our borrowing capacity guide covers the full mechanics. The hold means the compression has stopped. Assessment rates are no longer rising.
Average variable investment loan rates sit at 7.22% in August (Finder). Add APRA’s 3-percentage-point serviceability buffer and banks are testing at roughly 10.22%. That number has not moved since May. If you are on a variable rate, your repayments did not change this month. That has not been the case since January.
The Right Property Group’s 2026 Investor Sentiment Report found that 52% of investor respondents ranked borrowing capacity as their single biggest challenge, ahead of cash flow, market uncertainty, and finding a suitable property. A further 43% said their borrowing power had declined over the past year. Capacity is the constraint shaping every purchase decision in this cycle.
The hold does not restore what the hikes took. No major bank expects a cut before 2027. CBA forecasts the first cut in May 2027. Westpac sees August 2027. NAB is the most aggressive, predicting three cuts by December 2027 to reach 3.60%.
What matters now is that investors can plan around a stable number. A moving target is harder to buy into than a fixed one, even when the fixed one is lower than you want. Get your pre-approval refreshed this month. The next RBA decision is 29 September. Between now and then, your capacity figure holds.
Where Prices Sit in August
National dwelling values fell 0.7% in July, the steepest monthly drop since December 2022. Sydney led at -1.4%, Melbourne followed at -1.2%. The full city-by-city breakdown is in our August market update.
The pattern matches every prior hiking cycle. Premium suburbs fall first because their buyers borrow at maximum capacity. Affordable markets hold up because their buyers are not stretched. That dynamic is playing out again in real time.
National rental vacancy sat at 1.3% in July (SQM Research), with Brisbane, Perth, Adelaide, Darwin, and Hobart all recording vacancy below 1%. Rents keep climbing in tight markets. Falling values plus rising rents means improving yields. Every month values drift while rents hold, the entry point improves and the yield equation shifts further toward buyers who can act.
The Setup Heading Into Spring
Rates are stable until at least 29 September. Pre-approvals issued this month will not go stale mid-search. Vendor sentiment is the weakest since 2022, with listing volumes up while sale volumes sit well below average. That gap puts buyers in a stronger negotiating position than at any point in the last three years.
Less competition at inspections. Longer negotiation windows. More pre-market stock surfacing before the open market. This is what rate-cycle buying conditions look like.
The 2027 negative gearing and CGT changes add a structural dimension. From July 2027, negative gearing on established dwellings is abolished and the CGT discount reshaped. Investors buying established property under current rules have roughly eleven months left. Purchases settled before July 2027 are grandfathered. Whether you support the policy or not, it creates a deadline that shapes buying timing.
Every major bank forecasts rate cuts starting somewhere in 2027. When those cuts arrive, borrowing capacity recovers, sidelined buyers return, vendor leverage disappears, and prices respond. Investors who bought through the fear in every prior cycle captured the growth that followed.
If the question is whether to buy now or wait, the data argument has not changed. Time in market beats timing the market.
What to Watch Next
July CPI came in at 3.5% on 26 August. Annual headline inflation fell from 3.8% in June to 3.5% in July, and the trimmed mean held at 3.6% (ABS). Housing was still the largest contributor at 5.0%. That is a second consecutive read below the RBA’s May forecast track, and it weakens the case for a September hike rather than strengthening it.
RBA decision on 29 September. A third consecutive hold would all but confirm the hiking cycle is over. The major banks and market pricing are leaning that way.
SQM August vacancy data, due mid-September. National vacancy at 1.3% is tight by any historical measure. If it drifts higher while values fall, rental pressure eases at the margin. If it holds, yields keep firming.
After Three Hikes and Two Holds
Three hikes from February to May. Two holds since. Inflation softening. Unemployment rising. Housing prices falling faster than the RBA expected. No cut coming this year, but the path to 2027 cuts is clearer than it was three months ago.
Capacity has stabilised. Prices are softer. Competition is thinner. The tax settings on established property have a use-by date. That combination is temporary. It resolves either when rate cuts bring buyers back or when another hike compresses capacity further.
The window is open.
This is general information only and not financial advice. Speak to a qualified professional before making investment decisions.
If you want to know what your borrowing capacity buys in the markets the data supports, book a free discovery call.
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