By Jason Given · 2026-05-06 · 8 min read · Updated August 2026
Note: This article was written at the time of the May 2026 RBA decision. Forecasts and commentary cited may no longer reflect current conditions. See our blog for the latest.
On 5 May 2026, the Reserve Bank of Australia raised the cash rate by 0.25 percentage points to 4.35%. Eight of the nine board members voted for the rise, with one member voting to hold. This is the third consecutive increase after cuts in late 2025 gave way to renewed inflation pressure.
The RBA cited three factors in its decision: inflation picked up in the second half of 2025, the ongoing conflict in the Middle East has driven fuel and commodity prices higher, and firms are increasingly looking to pass cost increases on to consumers. Governor Michele Bullock described the board as resolute in its commitment to returning inflation sustainably to the 2-3% target band.
The numbers: On a $600,000 variable rate loan, this single rise adds approximately $90 per month to your repayments. Across three rises since the easing cycle reversed, that is around $270 per month added back.
Forecasts diverge significantly right now, reflecting genuine uncertainty about how inflation and the global conflict will play out.
If you are on a variable rate, your lender will typically pass on the full 0.25% within days. Check your lender's communication - some pass on the full amount, others only part of it.
Use this as a benchmark: every $100,000 of loan balance adds approximately $15/month per 0.25% rise. A $500,000 loan adds $75/month. A $700,000 loan adds $105/month. At the time of writing, Westpac was forecasting rates could reach 4.85% - though this forecast ultimately did not eventuate.
Fixed rates have already moved. Most lenders priced in further rises before this meeting, so the gap between variable and fixed has narrowed. Fixing now gives certainty against further rises but means you miss out if rates peak sooner than Westpac expects.
The pragmatic answer for most borrowers: a split loan. Fix 50-60% of your loan to cap your worst-case scenario, keep the rest variable to benefit from any future cuts. Lendology can model the exact dollar difference for your specific situation.
Competition among lenders for refinancing business remains fierce despite the rate rises. If your current loan rate starts with a 6 or higher, there is a high likelihood a better deal exists. Lendology's refinancing review compares your existing rate against 60+ lenders at no cost - and if we can save you money, we will show you the numbers before you commit to anything.
Lendology's commitment: We contact every client after an RBA decision that affects their loan. If you're not hearing from your broker, that's a sign you need a new one. Book a rate review →
At the time of this article (May 2026), the cash rate was 4.35%. The RBA has since made further changes. For the current cash rate and what it means for your loan, book a rate review with Lendology or check the RBA website.
On a $600,000 loan, each 0.25% rise adds approximately $90 per month to repayments. On a $750,000 loan, the impact is around $112 per month. If rates rose 0.75% in total over three meetings, that is $270 per month on a $600k loan.
At the time of writing (May 2026), Westpac was forecasting further increases to 4.60% and 4.85%. Those forecasts did not materialise - the RBA subsequently reversed course and cut rates as inflation eased. The cash rate has fallen well below the 4.35% level discussed in this article. See our blog for current analysis.
Fixing locks in certainty but means you miss out if rates fall sooner than expected. Staying variable keeps you exposed to further rises in the short term but lets you benefit if and when rates drop. A split loan - part fixed, part variable - is often the pragmatic solution. Book a chat with Lendology to model both options with your actual numbers.
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