RBA Decision: 3 February 2026
Cash Rate Raised to 3.85%
In a decisive move to curb persistent inflation, the Reserve Bank has raised the official cash rate by 0.25%, ending the pause seen in late 2025.
The Economy at a Glance (February Update)
Official Cash Rate Tracker
After holding rates steady through late 2025, the RBA has lifted the cash rate to 3.85% in response to rising inflation data.
Why Did the RBA Increase Rates?
What Today’s Hike Means for You
For Mortgage Holders
If you have a variable rate loan, expect your interest rate to increase by 0.25% shortly. This will increase your monthly repayments. It is critical to review your rate immediately.
Compare My Rate →For Savers
This hike is good news for savers. Banks should pass on this increase to savings accounts and term deposits. Shop around to ensure you are getting a rate close to or above 5%.
Property Market
Higher borrowing costs may cool the recent price acceleration. However, strong demand and tight supply mean the market is likely to remain resilient despite this rate rise.
Why This Hike is Significant
This move to 3.85% signals that the RBA’s patience with inflation has run out. After holding rates steady in late 2025 to “wait and see,” the data has confirmed that the economy is running too hot.
This hike serves as a warning that the easing cycle many hoped for in 2026 is effectively cancelled for now. The Board is prioritizing price stability over growth, meaning households should prepare for restrictive rates to continue through most of this year.
The Outlook: Higher for Longer
The Board has made it clear that inflation is likely to remain above target for “some time.”
- → More Hikes? The Board stated it “will do what it considers necessary,” leaving the door open for further increases if demand doesn’t cool.
- → Rate Cuts? Any hope of rate cuts has been pushed significantly further into the future, likely late 2026 or 2027.
In short: Budget for 3.85% (or higher) as the new normal for 2026.
Key Takeaways from the RBA’s Statement
The February decision marks a turning point for 2026. Here are the key messages from the Board:
- Inflation has surprised on the upside, picking up materially in late 2025.
- Private demand is growing more quickly than expected.
- The Board judges that capacity pressures are greater than previously assessed.
- It was appropriate to increase the cash rate to ensure inflation returns to target.
Key Implications For Your Finances
1. Refinancing is Essential
Your bank will likely pass on this 0.25% hike. Check your rate immediately. If it starts with a ‘6’ or higher, you need to speak to us today.
2. Adjust Your Budget
Recalculate your repayments with the new 3.85% cash rate baseline. Find savings now to accommodate the higher cost of debt.
3. Borrowing Power Impact
A rate hike reduces your borrowing capacity. If you have a pre-approval, check with your broker to see if it remains valid at the new higher rate.
4. Lock in Savings
With rates rising, term deposit rates should follow. It’s a prime opportunity to lock in a guaranteed return on your cash savings.
Worried about your repayments rising?
The rate has gone up, but your stress doesn’t have to. Let a Lend A Loan expert find you a competitive rate to offset this hike.
Or call us directly on 0488 220 222