RBA hikes to 4.35%: what today's third 2026 rate rise means for landlords

This article is general information only and does not constitute financial or tax advice. Consult a qualified tax professional for advice specific to your situation.

The Reserve Bank of Australia announced its May 2026 cash rate decision at 2:30pm Sydney time today, May 5, 2026. The Monetary Policy Board lifted the official cash rate by 25 basis points from 4.10% to 4.35%, the third hike of 2026 and the highest the cash rate has sat since late 2024.

The vote was 8-1 in favour of hiking, a substantial firming from the 5-4 split that produced March's move. Governor Michele Bullock confirmed the decision at her post-meeting press conference and signalled the door remains open for further moves if cost pressures build from here. The RBA Statement on Monetary Policy for May accompanies the decision and now has headline CPI peaking at 4.8% in June 2026 before easing.

The decision was widely expected. As we covered in the May 1 preview, 30 of 33 polled economists tipped the move and ASX 30-day futures were pricing it at roughly an 86% probability heading into today. What was less certain, and what matters more for landlords planning their next 12 months, is what comes after May 5. On that question the major banks have already started to disagree.

What Bullock Actually Said

Governor Bullock framed the decision as a defensive move against the risk that the oil shock embeds itself in broader prices.

The board's reasoning, as set out in the May 5 monetary policy statement, centres on three concerns. First, the March CPI release at 4.6% showed inflation running well above the 2-3% target band, with the trimmed mean stuck at 3.3%. Second, the Middle East conflict has lifted automotive fuel by 32.8% in March alone, and the RBA expects diesel and petrol cost increases to feed through to food, building products, and services pricing over coming months. Third, inflation expectations are starting to drift upward in the household and business surveys, which is the early signal of inflation becoming "embedded".

Bullock acknowledged the pain of another hike for borrowers but said the board could not afford to let cost pressures become "embedded" in the economy. Her phrase was direct: second-round effects could lead to even higher and more persistent inflation, requiring even more tightening to bring under control. The May move, on her framing, is insurance against having to do something larger later.

She also conceded that absent the war-driven oil shock, the board may not have moved today. With it, the calculus shifted enough to take the rate up.

What It Costs a Typical Investor Mortgage

The number that matters in your kitchen is not the cash rate. It is what your monthly repayment looks like once the hike flows through.

The numbers below assume a $600,000 variable rate investor loan, principal and interest, 30 years remaining, with the May 5 hike passed through in full. Your starting variable rate moves from approximately 6.50% to 6.75%.

• Monthly repayment increase: Roughly $95 to $100.
• Annual increase before tax: Close to $1,150.
• Across two investment properties at this scale: Around $2,300 per year in additional interest.
• At a 37% marginal tax bracket, the after-tax annual cost on one property: About $725.
• At a 45% marginal tax bracket, the after-tax annual cost on one property: About $635.

That is just today's move. If Westpac's view plays out and the RBA hikes again in June and August, the cumulative monthly hit on the same $600,000 loan moves to closer to $290 per month, or $3,500 per year. On two loans that is more than $7,000 in additional annual interest cost, against which deductibility returns roughly $2,300 to $3,300 depending on your marginal rate.

Roy Morgan modelling ahead of today's decision projected mortgage stress affecting 1.6 million Australians (around 30.3% of borrowers) once the May hike landed, up from 24.9% after March. Investor borrowers with multiple loans tend to sit higher in the stress brackets because their lending exposure is concentrated.

Calculate Your Own Numbers

Your exact position depends on your current rate, your outstanding balance, and how many years are left on the loan. Plug your own figures in below to see what the May 5 hike does to your monthly repayment.

If you want to compare two specific rates head to head, the interest rate calculator is the cleanest way to see what a single 25bp move adds across the life of the loan. To check whether your rent still covers the new repayment, the break-even rent calculator shows the rent figure your property needs to clear at the new rate. And to map cash flow under a few different scenarios, the cash flow calculator is built for exactly that.

How the Big 4 Banks Have Already Responded

Within hours of the RBA announcement, all four major banks confirmed full pass-through.

• CBA: Variable home loan rates up 0.25 percentage points effective May 15, 2026.
• NAB: Same. Up 0.25 percentage points from May 15.
• ANZ: Up 0.25 percentage points from May 15.
• Westpac: Up 0.25 percentage points for new and existing customers, effective May 15.

Pass-through is therefore quicker than after the March decision, where Westpac trailed the other three by about four days. If you bank with one of the Big 4, your variable rate moves on May 15. The first repayment at the new rate typically lands four to six weeks later, depending on your billing cycle, so most of the cash flow impact lands in late June or early July statements.

That timing brings a small silver lining. Any extra interest paid in June 2026 lands inside the 2025-26 financial year and is captured in this year's tax return as a deductible expense. The bulk of the cost, of course, falls into 2026-27.

The Big 4 are aligned on May. They have split sharply on what comes next.

• CBA and ANZ: Today's move is the likely peak. Both expect the RBA to hold at 4.35% from here unless inflation surprises further.
• NAB: Forecasts the cash rate to hold at 4.35% until at least mid-2027 before any easing begins.
• Westpac: The most hawkish of the four. Continues to argue further tightening is possible later in 2026 if cost pressures persist, with chief economist Luci Ellis previously flagging a path to 4.85% by August.

The RBA's own central forecasts in today's Statement on Monetary Policy assume the cash rate could rise further to 4.7% by year-end, sitting between the CBA/ANZ "we are done" view and the Westpac "more to come" view. The forecast is technical, not a commitment, but it tells you the board still sees upside risk to rates.

What This Does to Your Tax Position

Every dollar of extra mortgage interest is fully tax-deductible against your rental income. So the higher repayment from May 15 lifts your deduction at tax time.

For a $600,000 investor loan absorbing today's hike alone (around $1,150 in extra annual interest):

• 32.5% bracket: Deduction returns about $374. Net cash flow hit close to $776.
• 37% bracket: Deduction returns about $426. Net cash flow hit close to $724.
• 45% bracket: Deduction returns about $518. Net cash flow hit close to $632.

The deduction softens the blow. It does not erase it. If you are already running at a paper loss and your taxable income is too low to absorb the full deduction, the benefit is closer to zero. The mechanics around this are covered in our negative gearing explainer, which walks through the break-even maths at a few income levels.

For landlords closer to retirement, with lower employment income, this is the year where the value of every other deduction (depreciation, capital works, borrowing expenses, insurance, repairs) compounds. The full list of what you can claim is in our landlord expenses guide.

What to Do This Week

Today's decision is fixed. Your response is not.

Run your numbers under the new rate. Use the calculators above to see exactly what your monthly repayment moves to from May 15. If the new figure tips a property from cash-flow positive to negative, you want to know that today, not when the lender's letter arrives.

Check the case for fixing again. As covered in our Big 4 fixed rate review, every major bank pushed advertised fixed rates above 6% during April. Investor pricing currently runs roughly 6.20% to 6.60% for 1-year to 3-year terms across the Big 4. The market has already absorbed today's move, so fixing now is buying certainty rather than arbitrage. If a Westpac-style 4.85% scenario would tip a property into red, certainty has a real value.

Have a rent review conversation, with the rules in mind. National rents are running at around 5.7% annual growth and capital city vacancy is at 1.6%, the tightest level on record. The supply backdrop supports a review on properties sitting below market. Use the rent increase calculator to see the income difference and check the when to raise the rent guide for your state's notice and frequency rules before sending any notice.

Update your records to today. Whatever happens next, June 30 lands in eight weeks. The closer you are to up-to-date on rental income, expenses, and interest charges before the new rate kicks in, the less reconstruction work you have at tax time. The EOFY checklist is worth running through before your next accountant meeting.

Plan for the next decision, not just this one. The RBA next meets on June 30, 2026. NAB and CBA are forecasting a hold; Westpac is not. Your loan, your cash flow, and your decision tree all benefit from being clear on what each scenario does to your numbers before the next meeting, not after.

The decision today was widely tipped. The next one is genuinely uncertain. Today is the right week to be clear-eyed about what each property earns, what each one costs, and where the gap sits at the new rate.

Frequently Asked Questions

What did the RBA do on May 5, 2026?

The Reserve Bank of Australia lifted the cash rate by 25 basis points from 4.10% to 4.35% on May 5, 2026. The Monetary Policy Board voted 8-1 in favour of the hike, a sharper margin than the 5-4 split in March. It is the third consecutive rate rise of 2026.

Why did the RBA raise rates again?

Governor Michele Bullock cited March CPI of 4.6% and the risk that the oil shock from the Middle East conflict produces second-round effects on goods and services prices. The board's concern is that higher fuel costs become "embedded" in broader prices and inflation expectations, which would require even more tightening to bring back under control.

How much will the May 2026 rate rise cost a $600,000 investor mortgage?

A 25 basis point hike passed through in full adds roughly $95 to $100 per month on a $600,000 variable investor loan with 30 years remaining. That is close to $1,150 per year in additional interest, before any tax deduction.

When does the May 2026 rate rise take effect on my home loan?

All four major banks (CBA, NAB, ANZ, Westpac) announced they would pass the 0.25 percentage point hike through in full to variable home loan rates effective May 15, 2026. Your first repayment at the new rate will typically land four to six weeks after the change, depending on your billing cycle.

Will the RBA raise rates again in 2026?

The Big 4 are split. CBA and ANZ have called May 5 as the likely peak. NAB expects the cash rate to hold at 4.35% until at least mid-2027. Westpac argues further tightening is possible later in 2026 if cost pressures persist. The RBA's own forecasts assume the cash rate could rise to 4.7% by year-end.

Is a higher mortgage interest rate tax-deductible for investors?

Yes. Interest on a loan used to acquire or hold an income-producing rental property is fully tax-deductible. Higher interest means higher deductible expenses, which softens the cash flow hit at tax time but does not eliminate it. The deduction returns between 30 and 47 cents per extra dollar of interest depending on your marginal tax bracket.

When the rate moves, your cash flow moves with it. Propkt tracks the interest, the repayment changes, and every other deductible expense across each of your properties, so when you sit down with your accountant in July you are working from real numbers, not a rough estimate. Get started free.