RBA Hikes Rates to 4.35%, Critical Move for Homeowners

The Reserve Bank of Australia hiked rates for a third time this year, lifting the cash rate to 4.35%. All four banks are passing it on, but experts say home owners who act now could save more than $11,000 over two years

Key Highlights

• The RBA hiked the cash rate by 4.35%.
• All four major banks are fully passing on the hike to mortgage owners.
• Westpac again has the lowest Big Four variable rate at 5.99%
• The RBA noted that higher oil prices related to the war in Iran are contributing to inflation and causing second-round price effects across various goods and services.

RBA Raises Rates to 4.35%, Third Hike of the Year 

 The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.35% for the third time this year, and back again to where rates sat for more than a year and a half after the pandemic. The board voted 8-1 in favour, a remarkable turnaround from the March vote of 5-4 which indicated that the RBA was divided on the need to rein in inflation. The 4 largest banks have all indicated they will immediately pass on the full rise to variable-rate mortgage customers.

The Choice Comes With Fuel Price Increases

Higher fuel prices from the Iran war are directly adding to inflation and are showing up in the broader price level for goods and services, the RBA said. The high inflation registered at the start of 2026 added to this inflation impulse as capacity pressures began to build in the economy, the board said. Domestically, inflation is already outside the government’s control, and combined with the external oil shock, there is little room left for the RBA to maneuver. The 8-1 vote indicates the board now believes entrenched inflation expectations must be avoided.

It’s Time to Refinance, Experts Say You Could Save $11,000

Those homeowners who haven’t considered a loan in some time could be paying close to 7%, and the penalty for doing nothing is substantial, according to Canstar data insights director Sally Tindall. Refinancing a $600,000 debt down to 5.99% could save more than $11,000 in interest over two years, after switch costs of more than $1,000 were included, she said. 

Westpac currently sits at the bottom of the big four at 5.99%, with competition tipped to pull the market as low as 5.69% and up to 40 lenders showing at least one rate running below 6%. Yields on savings were pushed up again, but Tindall said that, after this hike, competitive ongoing rates now sit at 5.25 per cent and above, with Westpac offering up to 5.75 per cent for customers aged 18 to 34.

FAQs

1. What is the cash rate now? 

4.35%, lifted to 25 bps post Tuesday decision, hiking for the third time this year

2. Will all banks pass on the total rise? 

All four major banks have announced they will pass through the full increase to variable-rate mortgage holders.

3. How much can I save by refinancing now?

As much as $11,000 over two years on a $600,000 mortgage, even allowing for the costs associated with the switch of about $1,000.

4. What is the current lowest variable rate? 

The big four are headed by Westpac at 5.99%, with competition outside the banks perhaps forcing that down to as low as 5.69% across competitors in the market.

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