RBA Lifts Cash Rate to 4.35% as Banks Diverge on What's Next

Australia's third cash rate hike of 2026 has left the big four banks sharply divided on whether June brings another rise or a hold.

The Reserve Bank of Australia has raised the official cash rate by 25 basis points to 4.35%, marking its third consecutive hike in 2026, and the move has split Australia's major banks on where monetary policy goes next. The decision was carried by an eight-to-one board vote. In its post-meeting statement, the RBA noted that "inflation picked up materially in the second half of 2025" and that greater capacity pressures had been confirmed since the start of the year.

For millions of Australians on variable-rate mortgages, the question is no longer whether rates are high — it's how long they stay there.

Where the Big Four Now Stand

The rate decision has produced sharply divergent forecasts among the major banks, with each now reading the outlook differently.

**NAB** has shifted to a more hawkish position. Chief economist Sally Auld and head of Australian economics Gareth Spence have abandoned their forecast of a single May hike and now expect a further 25-basis-point increase in June. They wrote that they doubt a cash rate of 4.35% will be "sufficient to ensure that inflation returns to the target band", and noted that governor Michele Bullock's press conference language signalled the board is not inclined to wait. NAB's economists pointed to governor Bullock explicitly calling the "wait and watch" strategy the "wrong term", concluding the board believes it does not have time on its side. Over the longer horizon, NAB expects two cuts in the second half of 2027.

**Westpac** chief economist Luci Ellis has maintained her base case of further tightening in June and August but described the June decision as "more finely balanced" following the press conference. Ellis noted that the governor's language was "a bit more dovish than our read of the media release", and that remarks about hikes buying "space" to assess global volatility could be read as an inclination to pause in June.

**Commonwealth Bank of Australia (CBA)** head of Australian economics Belinda Allen maintains that May was the last hike, supported by the tone of both the RBA statement and press conference. Allen was clear that further tightening remained possible: "A further rate hike cannot be ruled out. This is dependent on federal and state budget outcomes, wage outcomes, consumer activity and Q2 2026 CPI." CBA's base case is two cuts in the second half of 2027.

**ANZ** head of Australian economics Adam Boyton retained his forecast of a June pause but acknowledged that "risks would now appear more skewed to a rate hike in August than prior to this meeting", with the Middle East conflict and its effect on oil flows remaining the key variable.

Mortgage Demand Is Already Cooling

New data from Equifax, reported by [The Adviser](https://www.theadviser.com.au/broker/48399-majors-split-on-next-rba-move-after-rate-hike), shows that sustained higher rates were already weighing on mortgage activity before today's decision.

Overall mortgage demand for Q1 2026 rose 7.5%, down sharply from 12.3% in Q4 2025. By March, annual growth had slowed to just 3.5%, compared with 8.9% in February. New mortgage lending grew 0.2% in March — effectively flat compared with 3.9% the month before.

Victoria is the clearest leading indicator of where the broader market may head. State-level mortgage demand was -3.2% year-on-year in February and accelerated to -7.9% by March 2026.

Refinancing is still growing but losing momentum. Switching to a different lender rose 1.5% in March, down from 7.2% in February. Refinancing with the same lender has held up better at 7.8% in March, though down from 15.6% the month prior. Equifax executive general manager Moses Samaha noted a clear behavioural pattern: "Refinancing hedge-betting has become a bit of a norm. Over the past few months, we've continued to see established home owners move to secure rates well ahead of the RBA announcements."

What Borrowers Should Do Now

With the cash rate at 4.35% and genuine uncertainty over whether June brings another hike or a hold, acting now rather than waiting puts borrowers in a better position. MFAA chief executive Anja Pannek said: "Another rate rise is difficult news for borrowers already managing higher repayments and broader cost-of-living pressures."

For borrowers on variable rates, the first step is confirming you are on your lender's best available rate — not the default rate issued at settlement. Many lenders price existing customers above what they offer for new business, and that gap can be identified quickly with a broker review.

Mortgage Choice CEO Anthony Waldron noted that borrowers are already acting: "Over the last two months, demand for refinance has been trending up, with refinance representing a greater share of overall submissions. What's most telling is the uptick in demand for fixed rate home loans, which tells us that borrowers are looking for certainty."

Use our [refinance savings calculator](/calculators/refinance-savings) to model what switching lender or renegotiating your rate could save each month. If you are uncertain how much you can borrow given today's rates, the [borrowing power calculator](/calculators/borrowing-power) gives a real-time read on serviceability. For live rates across variable and fixed products right now, [compare Australia's cheapest home loans](/home-loans/cheapest).

The big four are divided. The RBA has signalled it will remain data-dependent. For borrowers, that uncertainty is itself the signal to act sooner rather than later.