RBA holds at 4.35%: what the next two years look like for borrowers

Published 11 August 2026 · DeMarque Home Loans

The Reserve Bank held the cash rate at 4.35% on 11 August 2026 — a unanimous decision, and no surprise. The more useful reading is in what the Board said about the road ahead, because its own forecasts now stretch a subdued economy out to 2028. Here’s the map, and what a borrower can actually do with it.

First, what was said.

The decision, in the RBA’s own words

The Board left the rate unchanged “while it assesses how the economy is evolving” — and kept its options pointed one way, saying it would increase the cash rate “if upside risks materialise.” Inflation is still the problem: headline CPI was running at 3.9% in the year to June 2026, well above the 2–3% target band, with the disruption to global oil supply adding directly to it.

This is the fifth chapter of an unusual story: three cuts through 2025 took the cash rate to 3.60%, inflation came back, and three hikes in early 2026 took it straight back to 4.35%.

The RBA’s map of the next two years

From the August Statement on Monetary Policy (all figures RBA forecasts, published 11 August 2026):

• Inflation — falling only slowly: from 3.9% now to around 2.5% by early 2028, reaching 2.4% by late 2028. On the RBA’s own numbers, roughly eighteen more months above target.
• Growth — subdued throughout: GDP growth of just 1.4–1.9% a year through 2028.
• Jobs — softening gradually: unemployment drifting from 4.4% to about 4.8% by end-2028, though with employment still growing.
• Risks — “skewed to the upside” on inflation, citing possible escalation in the Middle East and persistent domestic pressures.

Market economists broadly read this as rates staying where they are for a while: CBA’s economists, for example, expect no cuts until 2027, pencilling in May and August of that year. That’s a forecast, not a promise — the RBA itself has kept a hike on the table.

What this means if you have a mortgage

The honest translation: plan on today’s rate, not on relief. A budget that only works if cuts arrive in 2027 isn’t a budget yet.

Three practical consequences follow.

Rate competitiveness matters more when rates are high. The gap between the average variable rate (~6.92%) and the sharpest offers (~5.69% as at August 2026) costs real money every month it persists — on a $600,000 loan, around $348 a month. In a two-year holding pattern, that’s over $8,000 of difference. Check yours with the refinance savings calculator or our 2026 refinancing guide.

Expensive debt has nowhere to hide. With card rates averaging 18.61% on interest-accruing balances, a long rate plateau makes consolidating high-interest debt — done with the right strategy — more valuable, not less.

Buffers beat forecasts. If your repayments are manageable, this is the window to get ahead: extra repayments or an offset balance built now is protection if the RBA’s “upside risks” arrive, and a head start if the 2027 cuts do instead.

For buyers watching from the sidelines

Subdued growth and easing housing conditions cut both ways — less competition, but serviceability tests at today’s rates plus a buffer are the binding constraint. Know your real number with the borrowing capacity calculator, and if you’re a first home buyer, the 2026 scheme stack doesn’t depend on the rate cycle.

The short version

The RBA is telling you its plan: rates parked, inflation grinding down slowly, and two years of not-much-help from the economy. The variables you control — your rate, your debt mix, your buffer — are worth more in that world, not less. Start with the free home loan health check or talk to us.