RBA Hikes Cash Rate to 3.85%, Homeowners Face Higher Mortgage Costs
The Reserve Bank of Australia (RBA) has increased the cash rate target by 25 basis points to 3.85 per cent, lifting borrowing costs for households and businesses. The decision will push up variable mortgage rates, resulting in higher monthly repayments.
The RBA Board said that inflation is expected to remain above the 2–3 per cent target range for a while longer.
“While inflation has fallen substantially since its peak in 2022, it picked up materially in the second half of 2025,” the institution said in a statement.
“The Board has been closely monitoring the economy and judges that some of the increase in inflation reflects greater capacity pressures. As a result, the Board considers that inflation is likely to remain above target for some time.”
The RBA predicts the jobs market will remain healthy, with the unemployment rate expected to stay around its current low levels this year and increase only gradually after that.
Activity and prices in the housing market are also reportedly continuing to pick up, as credit is “readily available to both households and businesses, and the effects of earlier interest rate reductions are yet to flow through fully to aggregate demand, prices and wages.”
This was the RBA’s first monetary policy meeting of 2026. In December 2025, the Board decided to leave the cash rate unchanged at 3.60 per cent.
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