The Reserve Bank of Australia has increased the official cash rate by 25 basis points to 4.35%. It is the third consecutive rise in as many months, effectively erasing every cut made in 2025.

Today’s increase returns the cash rate to the peak of the previous cycle in a matter of months and increases the pain at a time when inflation is also on the rise.

How Did We Get Here?

The RBA doesn’t move rates without reason, and the reasoning here is consistent: inflation is proving stubborn. Despite falling significantly from its 2022 peak, price pressures have picked up again since the second half of 2025. Conflict in the Middle East has pushed fuel costs sharply higher, the labour market has remained tighter than expected and domestic demand has been stronger than the RBA anticipated.

The board’s view is that inflation is likely to remain above the 2–3% target for longer than previously thought, and rates need to stay elevated to bring it back under control.

What Does 4.35% Actually Mean for Borrowers?

The cash rate is not your mortgage rate. It is the rate at which banks borrow from each other overnight, and it serves as the foundation on which all lending rates are built. Your home loan rate will always sit above it, reflecting the cost and risk of lending to individual borrowers.

What matters is what your lender decides to do with today’s move. Banks are not obligated to pass on RBA changes, although in practice, most do, and most do so quickly.

What Will Happen?

Three of the four Big Four banks are forecasting no further rises for the year, with Westpac an outlier predicting two further rate rises pushing the cash rate to 4.85%, a level not seen since 2008. However, at times of challenge also come moments of opportunity. Melbourne is one of Australia’s most undervalued real estate markets and interstate investors are circling for that reason. Under pressure landlords and home owners fatigued by rate rises and increased taxation and compliance, are already exiting the market, providing good buying opportunities. Deals are being done across Melbourne, particularly among the first homebuyer market, which is taking advantage of the conditions and a range of incentives to establish themselves.