RBA Increases Cash Rate to 3.85%: Why the RBA Acted Today?

The Reserve Bank of Australia (RBA) has delivered its first interest rate decision of 2026, and the news brings a fresh wave of pressure for Australian homeowners and businesses. At its February meeting today, the RBA Board decided to increase the official cash rate by 25 basis points to 3.85%.

This move marks a significant pivot in monetary policy, effectively ending the brief period of rate cuts seen in 2025. For those watching the market, this decision confirms what many lenders had already begun to price in: inflation remains “sticky,” and the battle to bring it within the 2-3% target range is far from over.

Despite a cooling period last year, recent data revealed that inflation picked up momentum in the second half of 2025. RBA Governor Michele Bullock noted that capacity pressures in the economy driven by strong household spending and a resilient labour market made the hike necessary to ensure price stability.

Key drivers for today’s hike include:

• Persistent Inflation: CPI figures rose to 3.8% in the year to December, well above the RBA’s comfort zone.

• Economic Momentum: Stronger than expected private demand and investment have kept the economy running “hot.”

• Housing Market Resilience: Activity and prices in the housing sector continue to climb, adding to inflationary wealth effects.

While today’s RBA announcement impacts variable rate holders almost immediately, the fixed-rate market has been shifting for weeks. You can check out our blog published in December 2025. In anticipation of this very move, over 50 Australian lenders—including the “Big Four” have already been hiking their fixed-rate products.

According to recent market data, the number of lenders offering fixed rates below 5% has plummeted. We are seeing a mass migration of rates “out of the 4s” and into the 5% and 6% territory.

• CBA and NAB led the charge in January, with some fixed terms increasing by as much as 0.70 percentage points.

• Macquarie Bank has implemented multiple hikes in the last two months alone.

• The “4% Era” is fading: Just a handful of lenders still offer rates starting with a 4, and these are expected to vanish shortly following today’s RBA decision.

For borrowers, the message is clear: The cost of debt is rising. If you are currently on a variable rate, you can expect your monthly repayments to increase within the next billing cycle. For those considering fixing their rate to gain repayment certainty, the window to secure a sub-5% deal is rapidly closing, if not already gone.

The Potential Impact of a 0.25% Rise:

Loan Amount $600,000 would require additional $90 in payment. Loan Amount $750,000 would require additional $112 and Loan Amount $1,000,000 (which is now median price in most of the metro areas) would require additional $150 in mortgage payments.

In a rising rate environment, “set and forget” is no longer a viable strategy for your mortgage or business finance. At Seed Loans, we recommend taking the following steps:

1. Review Your Current Rate: Check how your current interest rate compares to the market average (currently sitting around 5.92% for variable owner-occupier loans).

2. Assess Your Refinance Options: Even as rates rise, some lenders offer “honeymoon” periods or lower rates for new customers to gain market share.

3. Evaluate Fixing: If you need budget certainty, fixing now may protect you from further hikes later in 2026, though you must weigh this against the loss of flexibility and potential break fees.

The landscape is changing fast. If you’re concerned about how the RBA’s 3.85% cash rate will affect your bottom line, it’s time to act.

In this complex environment of 2026, relying solely on public bank advertisements is a recipe for error. The market is moving too fast and the products are too varied.

This is precisely where Seed Loans and our expert brokers come in.

Why You Need a Broker Right Now

• Access to the Whole Market: The rate listed on a major bank’s website is rarely their best offer. A broker has access to hundreds of products, including those from smaller lenders who may not have fully priced in the wholesale funding increases, or who are offering a temporary special. We can find you the hidden gem, the rate you cannot find alone.

• Navigating the Fine Print: Fixed rate loans have strict conditions, including penalties for breaking the loan early (known as break fees). A broker will assess your financial goals and property plans (Are you moving? Are you renovating?) to ensure the fixed term does not become an expensive trap.

• Structuring the Right Split: The safest strategy for many homeowners is a split loan, where a portion is fixed (for certainty) and a portion remains variable (for flexibility, offset account benefits, and the potential for a future rate cut). A Seed Loans broker will help you determine the optimal percentage split for your unique risk profile.

• Lender Relationship Management: The major banks that raised rates in late 2025 did so independently. Our brokers understand the internal mechanics of each lender and can anticipate which banks are likely to pass on any future cuts (or hikes) to their variable rate customers more quickly or slowly than others.

The recent rate increases are a clear signal that the days of easy money are firmly behind us, and volatility is the new normal. Whether you are looking to fix for certainty, stick with a flexible variable rate, or implement a smart split strategy, your decision requires a precise, professional assessment of your personal circumstances.

Do not gamble your family’s financial future on a guess about the RBA. Let the experts at Seed Loans guide you through this complex landscape, ensuring you secure the best possible home loan structure for the years ahead.

Contact Seed Loans today for a no obligation, comprehensive home loan review. The market has moved; it is time for you to move with it, intelligently and strategically.

Contact SEED LOANS today to start your homeownership journey. Phone: 0403 323 436 Facebook: https://www.facebook.com/SeedHomeLoansMortgageBroker

Please be advised that the information provided in this blog post by Seed Loans (www.seedloans.com.au) is for general informational and educational purposes only. This content reflects current market analysis and economic forecasts as of January 2026 and is subject to change without notice based on future economic data, RBA decisions, and global financial market movements. It is not financial advice. You must not rely on this information to make individual mortgage or financial decisions. The implications of choosing a fixed, variable, or split rate home loan are unique to your personal financial situation, income, expenses, and risk tolerance. Before making any decisions regarding your home loan, you should consult with a qualified and expert mortgage broker from Seed Loans and an independent financial advisor or accountant to obtain personalised, professional advice tailored to your specific needs. Seek professional guidance immediately.