February Cash Rate Decision 2026: What the RBA’s Call Means for Home Owners and Buyers

After an underwhelming cash rate reduction cycle in 2025, which saw the cash rate drop 75 basis points to 3.60%, the Reserve Bank of Australia has had their first monetary policy meeting for 2026.

The start of the year has seen a rise in inflation and a reduction in the unemployment rate, which has only increased the likelihood of a cash rate increase.

In the first cash rate decision for 2026, the RBA has decided to increase the cash rate to 3.85%.[1] This is the first cash rate hike in over two years, since November 2023.

Home owners and prospective home buyers will be disappointed by this news, as interest repayments are driven up.

With the Consumer Price Index (CPI) still outside the 2-3% range the RBA prefers for inflation, and December’s unemployment rate numbers at 4.1%, a 0.2% decrease from November [3], The RBA finds itself taking steps it deems necessary to temper the market.

Some lenders have already increased interest rates, with CBA and NAB announcing fixed-rate increases in the lead up to the cash rate decision [4].

How this Affects Home Owners

If you’re on a variable rate, unfortunately, you can expect your interest rates to start rising. This is obviously not the news any home owner wants to hear after the shortest rate cut cycle in 30 years [2].

Some commentators have suggested further increases may be possible, depending on economic conditions[3], so it’s important to ensure your home loan can sustain changing rates and shifting economic factors. If you’re struggling to meet repayments, want to explore what options are available to you, or are considering switching over to a fixed rate, now is the time to reach out to your local MoneyQuest broker to explore your options for a home loan structure designed to better suit your circumstances.

If you’re currently on a fixed-rate home loan, your rates will stay the same for now. However, keep an eye on your fixed rate expiration date. Your lender may not let you know when your fixed rate ends, and when it does, you could find yourself paying for adjusted rates.

Hopefully, we won’t see rate rises at the volume of 2022-2023, but whatever happens, know your MoneyQuest broker is on hand to help.

How this Affects Home Buyers

Rate increases can have a domino effect when it comes to how much a home buyer can borrow:

1. The RBA announces a cash rate increase.
2. Lenders carry that rate increase over to their home loan interest rates.
3. The amount of interest home buyers would be charged on a new loan increase.
4. Home buyers see a reduction in how much they’re allowed to borrow.

A home loan is a 20–30-year commitment, and in that time, interest rates are practically guaranteed to wax and wane.

Buying a home varies from person to person, and there are more factors to take into account than borrowing power and interest rates to ensure it’s the right decision for you.

What’s Next?

We can hope that this hike is a blip, and the cash rate stays stable for the rest of the year; however, it’s important to ensure you’re on top of your finance goals.

Whether you’re looking to buy, refinance, invest or bridge to your next home, we can help. We can compare rates across over 60 lenders, negotiate on your behalf and help find a loan that suits your needs. Reach out to your local MoneyQuest mortgage broker for friendly, face-to-face service you can rely on.

[1]Reserve Bank of Australia (2026). Statement by the Monetary Policy Board: Monetary Policy Decision | Media Releases. [online] Reserve Bank of Australia. Available at: https://www.rba.gov.au/media-releases/2026/mr-26-03.html [Accessed 3 Feb. 2026].

[2] Commins, P. (2025). Australia is facing its shortest rate cut cycle in 30 years as the RBA hints it may have to start hiking. [online] the Guardian. Available at: https://www.theguardian.com/australia-news/2025/dec/09/rba-interest-rate-announcement-decision-hike-mortgages-australia.

[3] Terzon, E. Butler, B. Rate hike expectations jump after jobs data comes in ‘stronger’ than expected. [online] Abc.net.au. Available at: https://www.abc.net.au/news/2026-01-22/abs-jobs-unemployment-december-2025-figures/106256288.

[4]Williamson, B. (2026). NAB the second big bank to hike fixed rates in 2026 as lenders pre-empt cash rate decision. [online] Canstar. Available at: https://www.canstar.com.au/finance-news/nab-the-second-big-bank-to-hike-fixed-rates-in-2026/ [Accessed 2 Feb. 2026].

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