• The RBA cash rate currently sits at 4.10% after the March 2026 increase.
• Latest bank commentary suggests May could still see another rate move, with some economists forecasting a further increase.
• Inflation, labour market strength and global uncertainty remain the key factors shaping the next decision.
• Reviewing your home loan now could help you stay prepared for any rate change.
Following the March 2026 increase, the RBA cash rate now sits at 4.10%, and attention has turned to the May meeting as the Board continues to assess inflation, employment and broader economic conditions.
With two rate increases already delivered in 2026, the cumulative impact on household budgets is becoming more noticeable, particularly for borrowers who have not reviewed their loan recently.
Economists are divided on what comes next. While some forecasts point to the possibility of another rate rise, others suggest the RBA may pause to assess how recent increases are flowing through to households and businesses.
What is the RBA cash rate?
The RBA cash rate is the interest rate set by the Reserve Bank of Australia for overnight loans between banks.
It influences the cost of borrowing across the economy, including many variable home loans and savings products.
When the cash rate moves, lenders review their own interest rates. However, each lender makes independent decisions about if, when and how much they adjust.
Source: Reserve Bank of Australia
What are economists predicting for May?
After correctly forecasting the March increase, Commonwealth Bank economists expect another rate rise in May, which could lift the cash rate to 4.35% as persistent inflation and a still-strong economy continue to put pressure on rates.
National Australia Bank also predicts a further rate rise in May, pointing to ongoing risks that inflation may stay above target for longer than anticipated.
Westpac’s expects another cash rate increase in May, with future moves depending on how inflation and economic conditions evolve.
AMP’s Head of Investment Strategy and Chief Economist, Shane Oliver, said the May decision remains uncertain and will depend on upcoming data.
“Our base case is that they will hike, but it’s not a certainty. There’s roughly a 60% chance of a hike and a 40% chance they will hold.” He noted the RBA will be closely watching inflation data, particularly whether underlying inflation remains above target.
These forecasts show that the May meeting is shaping up as a close watchpoint rather than a routine update. The next move will depend on how inflation, wages, spending, and broader economic conditions unfold.
What borrowers are seeing right now
Borrowers are already adjusting their approach as rates remain elevated. “I think rates will hold for now. I don’t think there will be a cut anytime soon, and overall, I do think rates are still rising. We haven’t seen its peak just yet” said Alya Manji, Aussie Hurstville.
“With the cost of living so high and interest rates rising alongside everything else, fixed rates should be a discussion if buyers want consistency and stability in repayments.”
What a May rate decision could mean for borrowers
If the RBA holds:
A pause may give households some short-term breathing room after two back-to-back rate increases. However, lenders make their own pricing decisions, so your interest rate may still change even if the RBA holds.
If the RBA hikes again:
Another increase could add more pressure to variable-rate borrowers and households already managing higher living costs. Even a 0.25% increase can affect repayments and borrowing capacity.
Alya Manji also noted how rate rises can affect borrowing capacity: “The biggest impact rate rises have is on borrowing capacity. As a rough guide, for every 0.25% increase, borrowing capacity can drop by around $25,000.”
As rates rise, some buyers may need to adjust their expectations, whether that means looking at different locations, property types or price ranges.
If the RBA cuts later this year:
Should inflation ease sustainably, rate reductions later in 2026 may be possible. Whether and how much lenders pass on would vary.
Wondering whether interest rates could rise again this year and what that might mean for you? Read our guide on whether interest rates will rise and what you can do to prepare.
Banks may not pass on future RBA moves in full
Even when the RBA adjusts the cash rate, lenders are not required to pass on the full change. Some may move earlier, later, by a smaller amount or by more than the RBA change.
If you’re unsure how any move applies to you, reviewing your loan can bring clarity.
You might also be interested in: Which banks have passed on the RBA’s latest interest rate?
What it means for savers
Rate decisions don’t just affect borrowers.
If rates rise, savings accounts and term deposits may see improved returns, although not all providers move at the same speed or by the same amount.
If rates hold or fall, savers may see returns stabilise or ease. It can be worth reviewing whether your savings structure still suits your goals.
Balancing debt management and savings strategy becomes increasingly important during periods of rate uncertainty.
Cost of living pressures remain in focus
Higher interest rates can flow through to mortgage repayments, rents and business costs. For many households, that adds to existing cost of living pressures.
That’s why even small rate movements matter. Reviewing your loan structure, repayment strategy, and household budget can help you stay prepared.
Higher rates can also affect broader housing market conditions. “For existing borrowers, that means more mortgage stress and less flexibility in household budgets,” Shane Oliver said.
In some cases, borrowers may also look at strategies like debt consolidation to help manage repayments. This involves combining multiple debts into a single loan, which may reduce overall monthly repayments depending on the structure and interest rate.
You can learn more about how this works in our guide to debt consolidation.
How refinancing, with or without an RBA move, could affect your mortgage
Whether the RBA holds rates in May or adjusts policy later in the year, borrowers may still have opportunities to review their loan position.
Even without a cash rate change, refinancing to a more competitive interest rate could reduce repayments or help shorten the life of a loan. Over time, some borrowers may find their rate is no longer as competitive as newer offers in the market, which is why regular reviews can be useful.
The following examples are illustrative only and based on simplified loan scenarios.
If rates increase
If the RBA were to deliver a third consecutive rate increase in May, the cumulative impact of three 0.25% hikes could begin to add up for borrowers.
For example, based on an average owner-occupier variable rate increasing from approximately 5.51% to 6.26%, repayments on a $700,000 loan over 30 years could increase by around:
$336 per month
$4,028 per year
Larger loan sizes may have a greater impact.
At the same time, borrowing capacity could also be affected. A cumulative 0.75% increase in interest rates may reduce borrowing power by approximately:
$42,000 to $56,000 on a $700,000 borrowing capacity
Higher borrowing amounts may see larger reductions
If rates hold
Even if the cash rate remains unchanged, borrowers may still be able to reduce repayments by refinancing to a more competitive loan.
In some cases, securing a lower interest rate could reduce monthly repayments or help shorten the life of a loan.
Borrowing capacity may also improve if a lower rate is secured, as reduced repayments can increase how much a lender is willing to offer.
The period following an RBA decision can also be a time when lenders adjust their pricing to remain competitive, which may create opportunities to review your current rate.
What the next RBA decision could mean for you
While economists debate the next move, it can help to think about what different outcomes could mean for your own plans.
If the RBA… | What you might want to think about |
|---|---|
Raises rates | • Review your borrowing power. Higher rates can reduce how much you can borrow. |
Holds rates | • A pause can be a good time to review your loan and borrowing capacity. |
Cuts rates | • Lower rates could increase borrowing power and reduce repayments. |
If you’re unsure what the next RBA move could mean for your situation, an Aussie Broker can help you review your options and plan your next step.
Tips to prepare for possible rate changes
• Review your current rate and repayment amount
• Check when you last refinanced or negotiated with your lender
• Build or maintain a buffer where possible
• Consider whether fixed, variable or split options suit your situation
• Talk to an Aussie Broker if you’re unsure what’s right for you
With over 1,000 Aussie Brokers across 200+ stores, we can help you understand your options and feel confident about your next step.
Need help reviewing your home loan?
If you’re unsure how a rate hold, hike or future cut could affect you, an Aussie Broker can help you understand your options.
We’ll look at your current rate, loan structure and goals, and help you decide whether refinancing, restructuring or staying put makes sense for your situation.
You can get in touch online, over the phone, or by visiting an Aussie store near you.
Book a free^ chat with an Aussie Broker to review your current loan and explore your options.