RBA holds at 4.35% after 2026's three hikes: what the confirmed pause means as banks split on what comes next

The Reserve Bank of Australia left the cash rate unchanged at 4.35% on June 16, pausing for the first time in 2026 after three consecutive hikes since February. For first home buyers trying to plan a purchase, the bigger question now is what happens next - and on that, Australia's four major banks are not in agreement.

What the RBA decided on June 16 and why

The nine-member RBA board voted unanimously to hold the cash rate at 4.35%, the first pause following increases in February, March and May 2026. The cumulative effect of those three hikes is roughly $272 per month in additional repayments on a $600,000 mortgage. The board judged it appropriate to hold and assess how previous increases are working through the economy.

Governor Michele Bullock confirmed that underlying inflation - the RBA's preferred measure - ticked upward to 3.4 per cent, still above the 2-3% target band. The bank remains concerned about inflation but acknowledged signs that the economy is softening after three consecutive rate rises.

Three banks tip cuts - one says two more hikes are coming

Australia's four major banks are now split on where the rate cycle goes from here.

• CBA, ANZ and NAB each expect the next move to be a cut. NAB made the most notable shift in recent weeks, scrapping its previous forecast for an August hike and joining CBA and ANZ in calling the end of the tightening cycle. NAB chief economist Sally Auld summarised the position as having "greater conviction that the next move in rates is down, but less conviction on timing." All three banks expect rate cuts to begin from mid-2027.
• Westpac holds a different view. The bank is still forecasting two further hikes - in August and September 2026 - that would lift the cash rate to 4.85%. Westpac economists believe second-round inflation effects may prove more persistent than the other banks expect.

Financial markets are currently pricing in roughly a one-in-two chance of one more rate rise in 2026. The August 5 RBA meeting will be informed by June quarter CPI data released in late July, which will give the clearest read on whether inflation is genuinely easing.

What each scenario means for your repayments and borrowing power

The gap between the two rate scenarios matters significantly for first home buyers. If the cycle peaked at 4.35% and cuts begin flowing through in 2027, borrowing capacity will gradually improve as lending rates come down. If Westpac's two-hike forecast proves correct, monthly repayments on a $600,000 mortgage would rise by approximately another $180 on top of the $272 already added this year.

The practical approach is not to bet on one outcome but to model both. Running your numbers at 4.35% gives you a baseline for what you can borrow today. Running the Westpac scenario at 4.85% tells you whether your budget still works if rates continue rising - and gives you confidence to move if it does.

What this means for first home buyers

Several practical steps are worth taking now regardless of which rate path plays out:

• Check your borrowing power at today's rate. Your borrowing capacity is assessed at 4.35% plus a 3% serviceability buffer applied by your lender. Understanding this number gives you a real picture of what you can afford to buy right now.
• Stress-test at 4.85%. If rates do rise further, knowing how your repayments would change helps you buy with confidence rather than hoping for the best. The Rate Shock Tester lets you model repayments across a range of scenarios.
• Act on grant deadlines before June 30. The Queensland $30,000 First Home Owner Grant drops to $15,000 from July 1 - a $15,000 reduction for buyers who sign contracts on new homes before June 30. Tasmania's stamp duty exemption on established homes up to $750,000 also closes June 30, saving eligible buyers up to approximately $28,900. These deadlines do not shift based on what the RBA does in August.
• ACT buyers may benefit from waiting. The ACT abolishes stamp duty entirely for all first home buyers from July 1, with no price cap and no income test. If you are purchasing in Canberra, the direction runs the other way.
• Work with a professional before making a decision. A mortgage broker or financial adviser can model your specific income, expenses and loan structure against both rate scenarios. The calculators below give you a strong starting point for those conversations.

Run the numbers

Use these tools to understand your position in the current rate environment:

• Interest Rate Shock Tester - see how your repayments change if rates rise to 4.85% or begin falling from 4.35%
• Borrowing Power Calculator - understand what you can borrow at today's cash rate of 4.35%
• Grant Stacker - check every grant and concession you may be eligible for, including the Queensland and Tasmania programs expiring June 30