RBA Raises Rates February 2026: What It Means for Your Home Loan

What Happened — the RBA’s Decision

On 4 February 2026, the Reserve Bank of Australia raised the cash rate by 0.25 percentage points to 3.85%. After three rate cuts through 2025 that took the cash rate from 4.35% down to 3.60%, the RBA reversed course with a hike that caught many borrowers off guard.

The decision came after the RBA held rates steady at three consecutive meetings in October, November, and December 2025. Most economists had expected another hold — or even another cut. Instead, the Monetary Policy Board pointed to persistent underlying inflation and a tighter-than-expected labour market as reasons to tighten.

“The Board judged that the current stance of monetary policy needed to be slightly more restrictive to ensure inflation returns sustainably to the target band.” — RBA Monetary Policy Statement, February 2026

For borrowers, the immediate question is simple: what does this mean for my repayments, and what should I do about it?

The Rate Roller Coaster: 2025–2026 Timeline

To understand where we are, it helps to see how we got here. The last two years have been a wild ride for anyone with a mortgage:

Three cuts followed by a hike. If you’re feeling a bit of whiplash, you’re not alone. The 2025 easing cycle gave borrowers welcome relief — the average owner-occupier on a variable rate saw repayments drop by around $330 per month over those three cuts. This February hike claws back roughly a third of that saving.

What I tell clients: don’t assume rates only move in one direction. The last 18 months have proven that the RBA will change course when the data demands it.

How the Hike Affects Your Repayments

Let’s talk real numbers. According to the latest ABS Lending Indicators (December Quarter 2025), the average owner-occupier home loan in Australia is now $693,801, with an average interest rate of 5.49% and average monthly repayments of $3,935.

Here’s what a 0.25% increase looks like across different loan sizes, assuming a 30-year principal and interest loan:

For a borrower with the national average loan of $693,801, that’s an extra $109 per month or $1,308 per year. Not catastrophic on its own, but it adds up — especially if you were already stretching your budget.

The state picture makes it worse

The impact varies dramatically by state because average loan sizes are so different. ABS data shows the average loan and monthly repayment by state:

NSW borrowers cop an extra $130 per month on average — almost double what borrowers in Tasmania and the NT are looking at. That’s the cost of borrowing in a state where the average loan is $828,065.

Variable vs Fixed: What Now?

This is the question I’m getting from every client right now. After a surprise hike, the instinct is to lock in a fixed rate for certainty. But it’s not that simple.

The case for fixing

• Budget certainty — You know exactly what you’re paying for 1-3 years, regardless of what the RBA does
• Protection from further hikes — If the RBA raises rates again, you’re insulated
• Peace of mind — For borrowers who lose sleep over rate movements, the psychological benefit is real

The case for staying variable

• Flexibility — Most variable loans let you make unlimited extra repayments and use offset accounts
• Rate cuts benefit you immediately — If the RBA reverses course again, you benefit straight away
• No break costs — Exiting a fixed rate early can cost thousands in break fees

The split loan approach

What I’m recommending to most clients right now: consider a split loan. Fix 50-60% for 2 years for budget certainty, and keep 40-50% variable with an offset account. This way you get protection from further hikes on the fixed portion, and flexibility plus offset benefits on the variable portion.

For a deeper comparison of fixed vs variable, including current rate data, read our fixed vs variable rate guide.

Should You Refinance?

Here’s something most borrowers don’t realise: a rate hike is actually one of the best times to refinance. Why? Because lenders compete hardest for new business when rates are rising and borrowers are anxious.

The average spread between what existing borrowers pay and what new customers are offered is around 0.5% to 1.0%. On the national average loan of $693,801, that gap represents:

• 0.5% savings: $215 per month ($2,580 per year)
• 0.75% savings: $320 per month ($3,840 per year)
• 1.0% savings: $425 per month ($5,100 per year)

That “loyalty tax” you’re paying by staying with your current lender could easily dwarf the $109 monthly impact of the rate hike. In my experience, borrowers who haven’t reviewed their loan in 12+ months are almost always paying more than they need to.

Read our complete refinancing guide for the step-by-step process and when it makes sense.

What the RBA Is Watching

To anticipate where rates go next, you need to understand what the RBA is focused on. There are four key indicators driving their decisions right now:

1. Underlying inflation

The trimmed mean CPI — the RBA’s preferred inflation measure — sat at 3.2% when the Board made its February decision. That’s still above the 2-3% target band. Until this number consistently falls below 3%, the RBA is unlikely to cut rates again.

2. The labour market

Unemployment at 4.1% is historically low. The RBA wants to see some softening here — not a crisis, but enough slack to ease wage pressures. Strong employment keeps consumer spending elevated, which keeps inflation sticky.

3. Housing market and credit growth

ABS data shows total new housing loan commitments grew 5.1% in the December quarter alone, with investment lending surging 31.8% year-on-year. The RBA is watching credit growth closely because rapid borrowing can fuel property price inflation and financial stability risks.

4. Global factors

Trade tensions, global commodity prices, and what other central banks are doing all feed into the RBA’s thinking. The US Federal Reserve and European Central Bank decisions influence the Australian dollar and import prices, which flow through to local inflation.

How to Protect Yourself from Rate Uncertainty

Whether rates go up or down from here, the smart move is to build resilience into your mortgage strategy. Here are six things you can do right now:

1. Budget with a rate buffer

Don’t budget to the cent. Build a buffer of at least 1% above your current rate into your household budget. If you can afford repayments at 6.49% when you’re paying 5.49%, you’ll handle any likely rate movement without stress.

2. Build your offset account

Every dollar in an offset account reduces the interest you pay. An offset with $50,000 in it on a $700,000 loan at 5.49% saves you about $230 per month in interest — more than offsetting the rate hike impact. If you don’t have an offset account, talk to your lender or broker about switching to a loan that includes one.

3. Consider a partial fix

As mentioned above, splitting your loan between fixed and variable gives you the best of both worlds. The certainty portion protects against hikes; the variable portion gives you flexibility and offset access.

4. Make extra repayments

If your loan allows it (most variable loans do), making even small extra repayments now builds a buffer. An extra $200 per month on a $700,000 loan can save you over $80,000 in total interest and cut years off your loan term.

5. Review your rate annually

Set a calendar reminder. Every 12 months, compare your current rate against what’s available in the market. A quick conversation with a broker takes 15 minutes and could save you thousands. This is free through us — we get paid by lenders, not by you.

6. Watch your fixed rate expiry

If you’re currently on a fixed rate, don’t let it roll to the lender’s standard variable rate (which is always higher). Start shopping 3-4 months before your fixed period ends so you can refinance or renegotiate before the expiry date.

What This Means If You’re Buying Now

If you’re in the market to buy a property, the rate hike changes a few things:

Your borrowing power just dropped slightly

Lenders assess your repayment capacity at your actual rate plus a buffer (typically 3%). A 0.25% increase in the actual rate means a slightly lower maximum loan amount. On average, a 0.25% rate rise reduces borrowing power by around $15,000–$20,000. Not huge, but it could matter at the margins. Read our borrowing power guide for the full breakdown.

Seller expectations may soften

A rate hike reminds the market that money isn’t free. Vendor expectations may moderate, particularly in the more expensive markets. This could create opportunities for buyers who are well-prepared and move quickly.

Build a budget buffer before you commit

Don’t borrow the absolute maximum. Leave room for at least two more 0.25% increases in your budget. If you can comfortably afford repayments at 6.5%, you’ll sleep well even if the RBA hikes again.

Get pre-approval locked in

Pre-approval gives you certainty on what you can borrow at current rates (most pre-approvals lock in a rate for 90 days). If you’re serious about buying, getting pre-approved now means you’re protected from any further short-term rate movements.

Frequently Asked Questions

Why did the RBA raise rates in February 2026?

The RBA raised the cash rate by 0.25% to 3.85% citing persistent underlying inflation (trimmed mean at 3.2%, above the 2-3% target), strong housing credit growth, and a tight labour market with unemployment at 4.1%. The Board determined that the easing delivered in 2025 had gone far enough given the economic data.

How much will my repayments increase?

On the average Australian home loan of $693,801, a 0.25% rate increase adds approximately $109 per month. On a $500,000 loan it’s around $79 per month. On a $1,000,000 loan it’s roughly $158 per month. These assume a 30-year P&I loan where the lender passes on the full increase.

Should I switch to a fixed rate?

It depends on your situation. Fixed rates provide certainty for 1-3 years, but you lose flexibility (offset, extra repayments) and you’ll miss out if rates drop. Many borrowers are opting for a split loan (part fixed, part variable) as a middle ground. Speak to a broker before locking in.

Will there be more rate hikes in 2026?

Nobody knows for certain. The RBA is data-dependent, watching inflation, employment, and housing growth. Most economists expect a hold at 3.85% for the next few meetings, but further hikes are possible if inflation proves sticky. The next RBA decision is in April 2026.

How does the cash rate affect my home loan rate?

The cash rate influences what banks charge. When it rises by 0.25%, most variable rates increase by a similar amount within 1-2 weeks. The average variable rate for owner-occupiers is currently 5.49% — that’s 1.64% above the 3.85% cash rate. Fixed rates are influenced by different factors including bond markets.

Should I refinance after the rate hike?

A rate hike is actually one of the best times to review your loan. Many borrowers pay 0.5-1.0% above what they could get by switching. On a $693,801 loan, even a 0.5% reduction saves $215 per month. If you haven’t compared rates in 12+ months, it’s worth checking — refinancing through a broker is free.