It’s been a tough start to 2026 for anyone with a variable rate mortgage.
The Reserve Bank raised the cash rate in February, again in March, and again in May — three increases of 25 basis points each, taking the cash rate from 3.60% at the end of 2025 to 4.35% today. Most lenders have already passed those increases on to variable-rate borrowers, although a handful of changes are still filtering through.
What that means in practice is that many households are now absorbing the full impact of all three rises at once. And it’s not a small amount.
What the Numbers Actually Mean
According to Canstar analysis, a borrower with $600,000 remaining on their mortgage is now paying approximately $272 more per month in repayments than they were before the rate cycle began — that’s around $3,265 extra per year.
For a household already managing groceries, energy bills and everything else that’s gone up over the past couple of years, that’s a real and meaningful shift to monthly cash flow. It’s not glamorous, but it’s the reality for a lot of Australian households right now.
The impact scales up with loan size. If you’re carrying $700,000 or $800,000, the cumulative hit is larger again.
Is This the Peak?
That’s the question everyone wants answered — and the honest answer is: possibly not yet.
The RBA’s May 2026 Statement on Monetary Policy was pretty direct: inflation is likely to remain above the 2–3% target range for some time, and the Board has signalled it is watching the data closely before making its next move. The next scheduled decision is 16 June 2026.
Some forecasters have pencilled in at least one more increase before the end of the year, with the peak cash rate potentially higher than where we are now. Others think June could go either way. Nobody has a crystal ball — including the RBA.
What that means for borrowers is simple: it’s worth planning as though rates could rise again, rather than assuming we’ve hit the top.
How Borrowers Are Responding
There’s no single right answer to how you respond — it depends on your loan, your lender, your rate, and your broader financial picture. But the moves we’re seeing most commonly right now are:
Reviewing their current rate. Many borrowers haven’t looked at what their lender is actually charging them for months or even years. In a rising rate environment, the gap between what you’re on and what’s available elsewhere can be surprisingly large.
Refinancing to a more competitive product. Refinancing activity has surged — more on that in a separate post — because borrowers are realising that switching lenders or products can meaningfully reduce their repayments, even in a rising rate environment.
Tightening discretionary spending. Not exciting, but effective. A lot of households are trimming the edges to create more breathing room.
Building buffers. Parking extra funds in an offset account or savings buffer gives you flexibility if repayments rise again — and means you’re not starting from zero if circumstances change.
Even small adjustments can add up. The goal isn’t perfection — it’s building a bit more resilience into your position.
Is Your Loan Still Working Hard Enough?
Here’s the thing about rate rises: they hit everyone, but they don’t hit everyone equally. If you’re on a competitive rate with the right product structure for your situation, you’re in a better position to absorb the pressure. If you’re on a rate that was fine two years ago but hasn’t been reviewed since, there’s a reasonable chance you’re paying more than you need to.
It’s worth checking. Not necessarily to switch, but to know where you stand.
We work with borrowers all across Australia — from first home buyers in Melbourne and Brisbane through to investors managing multiple properties in Perth and Adelaide — and the conversations we’re having most often right now are about understanding the current position and working out whether there are better options available.
Key Takeaways
- The RBA raised the cash rate three times between February and May 2026, taking it to 4.35%.
- According to Canstar analysis, a borrower with $600,000 remaining is paying approximately $3,265 more per year in repayments than before the cycle began.
- The RBA has signalled inflation remains a concern — further rate increases remain possible.
- Most borrowers are responding by reviewing their loan, refinancing, tightening spending, or building offset buffers.
- If you haven’t reviewed your loan recently, now is a good time to check whether it’s still competitive.
If you’d like a second set of eyes on your current loan, we’re happy to help. Clockwork Finance is based in Richmond, Melbourne, and we work with borrowers right across Australia.
