RBA May 2026 Rate Decision: What It Means for Your Mortgage Repayments
The Reserve Bank of Australia held the cash rate at 3.85% at its May 2026 board meeting — the second consecutive hold after the February and March cuts that brought rates down from a peak of 4.35%.
If you have a variable-rate home loan, here is what this decision means for you right now, what lenders are actually passing on, and how to think about your next move.
What did the RBA decide in May 2026?
The RBA Board voted to keep the cash rate on hold at 3.85% on 6 May 2026.
The decision was widely expected. Inflation is tracking within the 2–3% target band, but the Board signalled it wants to see another quarter of data before considering further cuts. The statement noted continued labour market resilience and some upside risk to services inflation.
Key numbers from the May statement:
- Cash rate: 3.85% (unchanged)
- Trimmed mean CPI (Q1 2026): 2.7%
- Unemployment rate (March 2026): 4.1%
- Next board meeting: 17 June 2026
How did we get here? Rate movement since the peak
| Date | Decision | Cash Rate |
|---|---|---|
| November 2023 | +25bp (final hike) | 4.35% |
| Feb 2025 | −25bp (first cut) | 4.10% |
| April 2025 | −25bp | 3.85% |
| May 2025 | Hold | 3.85% |
| August 2025 | Hold | 3.85% |
| November 2025 | −25bp | 3.60% |
| February 2026 | −25bp | 3.35% |
| March 2026 | −25bp | 3.10% |
| May 2026 | Hold | 3.85% |
Note: This table is illustrative of the rate trajectory context. Confirm exact dates via RBA.gov.au.
What does this mean for your repayments?
If you are on a variable rate, your repayments are unchanged from the previous period — lenders have already priced in the prior cuts.
If you are on a fixed rate that is about to expire, this is the window to act. Fixed rates set during 2022–2023 at 2–3% are rolling off, and today’s variable rates sit materially higher. Refinancing now to a competitive variable product locks in today’s pricing before any further movement.
Impact of the prior cut cycle on a $600,000 loan
| Cash rate | Indicative variable rate | Monthly repayment (30yr P&I) | Change from peak |
|---|---|---|---|
| 4.35% (peak) | ~6.25% | ~$3,693 | — |
| 3.85% (-50bp) | ~5.75% | ~$3,502 | −$191/month |
| 3.35% (-100bp) | ~5.25% | ~$3,316 | −$377/month |
| 3.10% (-125bp) | ~5.00% | ~$3,221 | −$472/month |
These are indicative figures. Your actual rate depends on your lender, LVR, loan type and borrower profile.
When will the next cut come?
Market pricing as at early May 2026 points to one further 25bp cut before the end of 2026, most likely in August or November. A second cut in early 2027 is possible if inflation continues to moderate.
The consensus view:
- June 2026: Hold (high probability)
- August 2026: Cut of 25bp possible (data-dependent)
- End of 2026: Cash rate most likely at 3.60% or 3.35%
This matters for borrowers who are considering whether to fix their rate now. Locking in a 2-year fixed rate now might mean missing the next cut if it comes in the second half of 2026.
Should you fix or stay variable?
There is no universal answer, but here is the framework:
Stay variable if:
- You believe there are 1–2 more cuts ahead in 2026
- You want flexibility to make extra repayments or offset your loan
- You may refinance, sell, or change lenders in the next 12 months
Consider fixing if:
- You want certainty for budgeting (especially useful for new buyers or visa holders with variable income)
- You have found a fixed rate below 5.5% for a 2-3 year term
- You have already benefited from most of the cut cycle and want to lock in gains
Split option: Many lenders allow you to split your loan — e.g. 60% variable, 40% fixed. This gives partial certainty while maintaining some flexibility.
What are lenders actually offering right now?
Not all lenders pass on RBA cuts at the same rate or in full. Here is what to look for in May 2026:
- Big four banks: Variable rates ranging from approximately 5.79% to 6.19% (comparison rates). Existing customers are often on higher rates than new customers.
- Second-tier lenders and non-banks: More competitive pricing, often 5.49%–5.79% variable for qualified borrowers
- Comparison rate gap: Some advertised rates look low but carry high fees. Always check the comparison rate, not just the headline rate.
If you have not reviewed your mortgage in the past 12 months, there is a high probability you are paying more than necessary. Refinancing to a lower rate on a $600,000 loan saves approximately $150–$250 per month depending on the gap.
For visa holders: does the RBA decision affect your eligibility?
The cash rate itself does not change your eligibility as a 482 or other temporary visa holder. However, the rate environment does affect:
- Borrowing capacity: Lenders use a serviceability buffer (typically 3% above the actual rate). Lower rates mean you can borrow more at the same income level.
- Assessment rates: At a cash rate of 3.85%, lenders typically assess your repayment capacity at around 8.5–9%. This has come down from peak levels of 9.5%+, meaningfully increasing borrowing power for visa holders.
If you were assessed for borrowing capacity 12–18 months ago, it is worth getting a fresh assessment. The improvement in the rate environment may have increased what you can borrow.
Common questions after a hold decision
Q: My lender raised my rate during the hiking cycle but hasn’t fully passed on the cuts. What can I do?
Call your lender and ask for a rate review. If they refuse to match market pricing, refinancing is typically straightforward and can be completed in 4–6 weeks. A broker can run a comparison for you.
Q: I am mid-application for a home loan — does the hold affect my pre-approval?
Pre-approvals are typically valid for 90 days. A hold does not invalidate your pre-approval. If rates change before you settle, your lender will reassess serviceability at settlement.
Q: I have an offset account — how does the hold affect my strategy?
Keep maximising the offset balance. The effective return on offset funds equals your mortgage rate, which at 5.75%+ is well above savings account rates. A hold period is an ideal time to build the offset.
Q: When is the next RBA meeting?
17 June 2026. The following meeting is scheduled for 5–6 August 2026.
What to do right now
The hold gives you a clear window to act:
- Check your current rate — if it ends in more than 5.79%, you are likely overpaying
- Get a free mortgage review — a broker can compare your current deal against the market in 24–48 hours
- Review your fixed vs. variable split — if coming off a fixed rate in 2026, start planning 60–90 days before expiry
- Reassess your borrowing power — lower rates have improved serviceability calculations
Last updated: May 2026. Rate figures are indicative and subject to change. This is general information only and does not constitute financial advice. Speak with a licensed mortgage broker for advice specific to your situation.