RBA August Rate Call: Hold, Hike or Cut for Borrowers?

With the major banks split and the cash rate already at 4.35%, Australian borrowers face a defining August RBA meeting — here's what to watch.

The Big Banks Are Divided — and That's Telling You Something

The Reserve Bank of Australia has raised the official cash rate three times in 2026, bringing it to 4.35%, and yet the country's four major banks cannot agree on what comes next.

Westpac is firmly in the hike camp. Luci Ellis, chief economist at Westpac Group, said earlier this month that the bank's "conviction that the RBA will increase the cash rate in August has increased," pointing to post-meeting RBA communication that included unusual language stating the Monetary Policy Board "stood ready to hike if needed." Ellis said the RBA was "clearly more worried about upside risks to inflation than downside risks."

Commonwealth Bank of Australia and ANZ are both calling a hold at the August meeting. National Australia Bank has gone further, saying the RBA's next move will ultimately be a rate cut — the question is timing.

That split is telling. When the country's biggest lenders disagree this sharply, it signals that the June quarter CPI result due 29 July will be decisive. Westpac's July Market Outlook still flags a possible follow-up hike in September as the most likely scenario, though "conviction about its occurrence and timing has declined." Westpac has also pulled its rate-cut timeline forward to the second half of 2027, from an earlier forecast of early 2028.

Australian Broker has published a full breakdown of lender forecasts and broker perspectives on the current environment.

What an August Hike Would Actually Mean for Mortgage Holders

The stakes are concrete. Roy Morgan modelling shows that a further 25 basis point increase — lifting the cash rate to 4.60% — would push the share of mortgage holders at risk of financial stress to 30.2%, or approximately 1.6 million people.

The July Westpac-Melbourne Institute Consumer Sentiment Index captures the mood. Overall sentiment rose 4.1% in July to 83.9, up from 80.6 in June. Matthew Hassan, Westpac's head of Australian macro-forecasting, attributed the improvement partly to "relief that 'worst case' scenarios — around energy prices, interest rates, and jobs — are not playing out." But the index still sits in the bottom 10% of all results in the survey's 50-year history.

Borrowers remain cautious. Some 60% of consumers expect mortgage rates to rise over the next year, down from 66% in June but still a majority. Seventeen per cent of respondents said they simply "don't know" where rates are headed — the highest share since March 2022.

On the ground, brokers are watching closely. Adele Andrews, director at Melbourne-based Australian Property Home Loans, said she "would not be surprised if they raise rates in August," citing trimmed mean inflation figures that have been rising. The pressure is most acute for first-home buyers: "The needle is constantly moving for these guys, and it's crucial that they stay on top of their purchasing budgets," she said.

Jake Sgarbossa, head of commercial and property finance broker at My Mortgage Freedom in Melbourne, expects a hold but flagged that one further hike later in 2026 remained possible if inflation stays persistent. "Buyer confidence remains subdued. Affordability is stretched, borrowing capacity has reduced and many clients are hesitant to make major decisions while there is still uncertainty about where rates are heading."

Not everyone sees it darkly. Rory Sercombe, owner at Own Home Loans in Melbourne, described the decision as "finely balanced" and said a cut "can't be ruled out," adding that "borrowers are becoming more confident, enquiry levels are improving and refinancing activity remains strong." In Brisbane, broker Luke Ashby at Emerge Finance said first-home buyers were returning. "Now that the dust has settled, people still want to invest," Ashby told Australian Broker. "They're just playing the cards they were dealt and trying to get in while there's still a window."

Rates Right Now — and What to Do Before August

While the cash rate debate plays out, fixed rates have nudged lower in recent weeks. Five lenders adjusted a combined 75 fixed rates, cutting them by an average of 0.3%. Variable rates have barely moved — one smaller lender trimmed a single product by 0.1%.

The average variable rate for owner-occupiers on principal and interest loans currently sits at 6.66%. The cheapest variable rate in the market is 5.69%, offered by two smaller lenders — LCU and Pacific Mortgage Group — with just three products sitting below 5.75% across the whole market.

Rate cuts are coming eventually, with the broad consensus now pointing toward late 2027, but the path there may include further hikes first. That makes now a sensible time to take stock of where you stand.

If you're on a variable rate noticeably above 6.66%, compare your deal against the cheapest home loans currently available. The gap between what you're paying and what's on offer may have widened more than you realise. If you've owned for two or more years, run the numbers on refinancing — the potential savings are often larger than expected once lenders are competing for your business.

For first-home buyers sitting on pre-approvals, the August meeting is worth tracking. An unexpected hike can reduce borrowing capacity, sometimes meaningfully. Use our borrowing power calculator to model how different cash rate scenarios — hold at 4.35%, hike to 4.60%, or a future cut — affect the size of loan you can service.

The 29 July CPI release is the key date on the calendar. Whatever it shows, being clear about your own financial position before that date is a much smarter approach than waiting on the RBA's decision to start thinking.