The RBA's February 2026 decision to raise the cash rate back to 3.85% caught many off guard. After three successive cuts in 2025, markets had expected the easing cycle to continue. Instead, persistent inflation forced the Board's hand.
Here's a factual breakdown of where rates stand, what it means for repayments and borrowing power, and where property prices are heading — based on the latest data from the RBA, KPMG, APRA, and major bank economists.
The Full Rate Timeline: 2022 to Now
The RBA's hiking cycle from May 2022 to November 2023 was the most aggressive in a generation — 13 increases taking the cash rate from 0.10% to 4.35%. After holding for over a year, three 25bp cuts in February, May, and August 2025 brought it down to 3.60%.
Then came the surprise: in February 2026, the RBA reversed course with a 25bp hike to 3.85%, citing inflation that "remains above target."
| Date | Change | Cash Rate | Context |
|---|---|---|---|
| May 2022 | +0.25% | 0.35% | First hike since Nov 2020; inflation at 5.1% |
| Jun–Nov 2022 | +2.50% total | 2.85% | Fastest series of hikes in RBA history |
| Feb–Jun 2023 | +1.25% total | 4.10% | Continued tightening despite slowing growth |
| Nov 2023 | +0.25% | 4.35% | Peak — held here for 14 months |
| Feb 2025 | −0.25% | 4.10% | First cut in four years |
| May 2025 | −0.25% | 3.85% | Second cut as inflation eased |
| Aug 2025 | −0.25% | 3.60% | Third cut — market expected more to follow |
| Feb 2026 | +0.25% | 3.85% | Surprise hike — inflation "remains above target" |
Source: RBA Cash Rate Target
What the March 2026 Decision Looks Like
The RBA Board meets in March 2026 with markets split on the outcome. Governor Michele Bullock has stated that another hike remains possible if inflation expectations become unanchored, stressing the Board would not necessarily wait for full Q1 inflation data before acting.
CommBank economists expect a second hike to be likely in May, while most other major banks expect a hold in March as the Board assesses incoming data.
"Every meeting is live." — RBA Governor Michele Bullock, February 2026
What This Means for Your Repayments
Here's what borrowers are actually paying at the current 3.85% rate, compared to the 4.35% peak and the 3.60% low from August 2025. These are 30-year principal & interest repayments:
| Loan Size | @ 4.35% (peak) | @ 3.85% (current) | @ 3.60% (2025 low) | Saving vs Peak |
|---|---|---|---|---|
| $500,000 | $2,489 | $2,344 | $2,273 | $145/mo saved vs peak |
| $700,000 | $3,485 | $3,282 | $3,183 | $203/mo saved vs peak |
| $900,000 | $4,480 | $4,219 | $4,092 | $261/mo saved vs peak |
| $1,200,000 | $5,974 | $5,626 | $5,456 | $348/mo saved vs peak |
Calculated using standard amortisation formula for 30-year P&I loans. Actual repayments vary by lender, loan structure, and fees.
Borrowing Power: APRA's New DTI Rules
On top of rate movements, APRA's new debt-to-income (DTI) limits took effect on 1 February 2026. Banks are now restricted to issuing no more than 20% of new loans to borrowers with DTI ratios of 6x or higher.
What this means in practice:
- Most owner-occupiers are unaffected — the majority borrow below the 6x threshold
- Investors feel it most — they're overrepresented in high-DTI lending, with ~10% of investor loans above the 6x ratio
- Each rate hike reduces borrowing power by approximately $12,000 per 25bp increase for an average income earner (Canstar analysis)
- New dwelling purchases and bridging loans are exempt from the DTI cap
The APRA rule doesn't automatically reduce your borrowing capacity — it limits how many high-leverage loans a bank can hold. A bank can still approve a high-DTI loan, but only if it fits within their 20% quarterly cap.
Source: APRA — Activating DTI Limits
Where Property Prices Are Heading: KPMG's 2026 Forecast
KPMG's January 2026 Residential Property Market Outlook forecasts national house prices to rise 7.7% this year, with significant variation between capitals:
| City | House Price Forecast | Unit Price Forecast | Key Driver |
|---|---|---|---|
| Perth | +12.8% | +11.6% | Interstate migration, mining investment |
| Brisbane | +10.9% | +7.8% | Population growth outpacing supply |
| Darwin | +10.5% | +13.4% | Low base, defence spending, resources |
| Adelaide | +8.2% | +6.3% | Affordability relative to east coast |
| Melbourne | +6.8% | +7.2% | Population recovery, unit demand |
| Sydney | +5.8% | +5.1% | Affordability ceiling limiting growth |
| Hobart | +5.4% | +4.9% | Small market, limited supply |
| Canberra | +4.7% | +4.2% | Government employment stability |
Source: KPMG Residential Property Market Outlook, January 2026
Key themes driving the market:
- Supply shortage persists — building approvals remain well below the government's 1.2 million homes target
- Net overseas migration continues at elevated levels, adding demand pressure
- The 5% Deposit Scheme expansion is supporting first-home buyer activity, especially in Perth and Brisbane
- A "two-speed" market — mid-sized capitals surging ahead while Sydney and Melbourne grow more modestly
The Outlook: A Year of Two Halves
Most economists expect 2026 to play out in two distinct phases:
- First half — strong momentum as pent-up demand from 2025's rate cuts flows through. Auction clearance rates remain elevated. Perth, Brisbane, and Adelaide continue to outperform.
- Second half — affordability constraints start to bite. If the RBA delivers further hikes (CommBank expects one more in May), sentiment could cool. The DTI limits may also begin to constrain leveraged investors.
The supply-demand imbalance remains the structural story. Until construction catches up — and there's little sign of that happening soon — property prices have a floor underneath them in most markets.
Key Takeaways
- The cash rate is at 3.85% after a surprise February 2026 hike — further hikes are possible
- Repayments are still ~$150-300/month lower than the 4.35% peak depending on loan size
- APRA's new DTI limits primarily affect investors with high leverage, not most owner-occupiers
- KPMG forecasts 7.7% national house price growth in 2026 — Perth (+12.8%) and Brisbane (+10.9%) leading
- A two-speed market is emerging: mid-sized capitals surging, Sydney/Melbourne more subdued
Disclaimer
This article is general information only and does not constitute financial advice. Data sourced from the RBA, KPMG, APRA, and major bank economist reports as at March 2026. Forecasts may not eventuate. Property investment carries risks including capital loss and illiquidity. Always consult a licensed financial adviser or mortgage broker before making financial decisions.
