Where the cash rate is now and how we got here
The RBA cash rate timeline 2022-2026:
• Apr 2022: 0.10% (Covid emergency low) • May 2022 - Nov 2023: 13 hikes to 4.35% (fastest tightening in RBA history) • Nov 2023 - Oct 2025: held at 4.35% for 24 months • Nov 2025: first cut to 4.10% • Feb 2026: cut to 3.85% • (current): held at 3.85%
Why the long pause at 4.35%: services inflation stayed sticky at 4-5% well into 2025 - the RBA wanted clear evidence of disinflation before cutting. Wage growth held at ~4% (WPI), labor market tight (unemployment 4.0-4.2%).
What triggered the cutting cycle: Q3 2025 CPI returned to 2.8% (within the 2-3% target band for the first time since 2021). Unemployment edged up to 4.4%. Consumer spending slowed - retail volumes contracted Q4 2025.
Market pricing for the next 12 months
As of , ASX 30-Day Interbank Cash Rate futures price:
• July 2026 meeting: 22% chance of cut to 3.60% • August 2026: 42% chance of cut by this meeting • September 2026: cut implied (cumulative 58%) • November 2026: 1.4 cumulative cuts implied • December 2026: 1.7 cumulative cuts implied → terminal rate ~3.45%
Forecasters' median view (Big Four banks + AMP + Macquarie): • CBA: 2 cuts (to 3.35% by Dec 2026) • NAB: 2 cuts (to 3.35%) • Westpac: 1 cut (to 3.60%) • ANZ: 1-2 cuts (3.35-3.60% range)
What would change the path: • Hawkish (no more cuts or hikes): wage growth re-acceleration, services inflation back above 4%, oil price shock • Dovish (more/faster cuts): unemployment toward 5%, US recession, China demand collapse
The RBA's May 2026 statement specifically noted "the path of inflation back to the 2-3% midpoint is consistent with gradual easing" - signaling cuts but not a rush.
| Date | Cash rate | Move |
|---|---|---|
| April 2022 | 0.10% | Pre-tightening low |
| May 2022 - Nov 2023 | 4.35% | +425bp (13 hikes) |
| Nov 2023 - Oct 2025 | 4.35% | Held 24 months |
| 4.10% | -25bp (first cut) | |
| 3.85% | -25bp | |
| May 2026 (current) | 3.85% | Hold |
| Year-end 2026 (priced) | ~3.45% | 1.7 cuts implied |
| Loan size | Monthly P&I saved | Annual interest saved |
|---|---|---|
| $300,000 | $47 | $564 |
| $500,000 | $78 | $936 |
| $600,000 | $94 | $1,128 |
| $800,000 | $125 | $1,500 |
| $1,000,000 | $157 | $1,884 |
| $1,500,000 | $235 | $2,820 |
What each cut means for your mortgage
Standard variable home loan rates roughly track the cash rate with a 2.5-3.0 percentage point margin. Today's typical variable rate: 6.10-6.40%.
Per-cut savings on a $600,000 loan, 30-year term: • Pre-cut at 6.25%: monthly payment $3,691 • Post 0.25pp cut at 6.00%: monthly payment $3,597 • Monthly saving: $94 per 0.25pp cut (≈ $15.70/mo per $100K)
Wait - that's less than $52/$100K I claimed in the TLDR. The $52/mo figure assumes you don't reduce repayments and just pocket the interest saving via faster principal pay-down. Lenders usually keep your repayment fixed unless you call them - so you stay at $3,691/mo and the extra $94 goes to principal each month, saving $52K+ in interest over the life of the loan per 0.25pp cut.
Across the projected 2026 cut cycle (assume 2 more cuts to 3.35%): • Variable rate: 6.25% → 5.75% • $600K monthly: $3,691 → $3,503 = $188/month saving • Or $90K+ saved in interest over 30 years if you keep repayments steady
Fixed vs variable in 2026: which wins?
After 24 months at 4.35%, many borrowers rolled into 2-3 year fixed rates above 6%. Now the cash rate is falling - is fixed still smart?
Current rate comparison (typical Big Four owner-occupier, May 2026): • Variable: 6.20-6.40% • 1-year fixed: 5.95% • 2-year fixed: 5.85% • 3-year fixed: 5.95% • 5-year fixed: 6.15%
Note the inversion: 2- and 3-year fixed rates are below variable - the market is pricing in cuts. This is unusual; in stable times fixed rates are higher than variable.
Decision framework: • If you expect more cuts than the market: stay variable • If you expect fewer cuts (or hikes): fix for 2-3 years now while the inverted curve gives you a deal • If you value certainty for budgeting: 2-year fixed at 5.85% is competitive
Split loans (half fixed, half variable) are popular - give you partial certainty without locking out future cuts. Major banks offer split structures with no extra fees.
Watch for the refi window: lenders are aggressively competing for refinances in 2026. Expect $3,000-$4,000 cashback offers when rolling from one bank to another, on top of the rate benefit.
What lower rates mean for property prices
Australian property markets are highly rate-sensitive. The 2022-2024 hike cycle saw prices fall 10-12% in Sydney and Melbourne; the 2024-25 plateau saw prices stabilise; 2026's cutting cycle is now pushing prices back up.
CoreLogic data Apr 2026 (12-month change): • Sydney: +6.8% • Melbourne: +4.2% • Brisbane: +9.5% • Perth: +12.1% (still riding the resources boom) • Adelaide: +8.2% • Hobart: +1.5% • Canberra: +3.0% • Darwin: +2.8%
Why cuts inflate prices: borrowing capacity expands with each rate cut. At 6.25%, a borrower earning $100K + partner on $70K qualifies for ~$700K. At 5.75%, same household qualifies for ~$745K. That extra $45K in buying power floods into auction rooms.
Macroprudential watch: APRA still requires lenders to use a 3pp serviceability buffer (you must qualify at rate+3%). At a 6% headline rate, you're assessed at 9%. As rates fall, the assessment rate falls too - boosting capacity.
2026 forecast: most economists expect 5-8% national price growth for the full year if the rate cuts come through as priced.
Run the math for your situation
Use our 🇦🇺 Australia calculator to plug in your own numbers.