The RBA Just Reversed Every Cut From 2025. Here's What I Actually Think It Means.
- thebuyersally
- 7 days ago
- 4 min read
Three hikes in 2026. Cash rate back to 4.35%. And a rental market that is about to get a lot harder.
On Tuesday 5 May, the RBA raised the cash rate by another 0.25% to 4.35%. That is the third hike in 2026, and it means every single rate cut from last year has now been fully reversed. We are back to exactly where we were at the previous peak.
I want to break down what this actually means in practical terms, and share an honest take that does not always make the headlines.
BY THE NUMBERS
WHY DID THIS HAPPEN?
Inflation did not stay tamed. After three cuts in 2025, conditions in both the jobs market and consumer prices stayed too hot. Then the Middle East conflict pushed fuel prices higher, taking headline CPI to 4.6% in the March quarter, well above the RBA's 2 to 3% target band.
The RBA's own statement noted that firms are already looking to pass rising costs onto consumers, and short-term inflation expectations have gone up. Until those readings come down, the board has made clear it is prepared to keep tightening.
COULD THERE BE MORE HIKES?
Potentially. ANZ, CBA and NAB are forecasting a hold for the rest of 2026. Westpac is more hawkish, tipping two more increases in June and August, which would put the cash rate at 4.85%, a level not seen since 2008. The next RBA meeting is 15 and 16 June.
MY HONEST TAKE
I want to share something I think does not get said enough, and I know it is not what everyone wants to hear.
There is a group of people who have been quietly hoping that rising rates would finally bring property prices crashing down. The idea being: sit it out, wait for the collapse, buy cheap. I get the logic. But I do not think that is how this plays out.
Rate hikes reduce borrowing capacity, which does soften demand at the top end. What they do not do is create more homes. Australia is already tracking around 262,000 dwellings short of the federal Housing Accord target. New approvals are still falling. Build costs are still elevated. The homes that are needed simply are not being built fast enough.
Here is what actually happens. When borrowing power drops, the people who were close to buying stay renters instead. That adds more demand to a rental market that was already stretched. At the same time, a wave of long-term landlords, many of them older investors tidying up their estates or helping their kids buy, are selling up and taking their rental properties off the market entirely. New investors are coming in, but not fast enough to replace them. And construction certainly is not filling the gap, with national rental listings sitting around 17% below the five-year average. So you end up with more renters chasing fewer properties. That is not relief. That is the crisis getting worse.
"Higher rates do not fix a housing shortage. They just change who bears the cost of it."
The people most exposed to further rate rises are not necessarily those who bought established property in the right location. They are the renters who were hoping to buy and now cannot, competing for a shrinking pool of rentals with everyone else in the same position.
I am not saying prices cannot soften in certain markets or price brackets, they already have in parts of Sydney and Melbourne. But a broad crash that makes housing genuinely affordable? The data is not pointing there, and I would rather give you my honest read than tell you what is easy to hear.
This post is general information only and does not constitute financial or investment advice. Please speak with your broker and financial adviser about what this means for your specific situation.
WHAT I AM SEEING ON THE GROUND
Finance-ready buyers are going back to their brokers to confirm their numbers are still current. A pre-approval from earlier in the year may not reflect what lenders will approve today.
The buyers I am working with are not letting rate uncertainty freeze them entirely. Listings are thin, new construction is behind, and quality stock in the right areas is not sitting around waiting.
A lot of active buyers are asking their broker to model scenarios at higher rates before committing, not because they expect the worst, just so they know the numbers hold up under different conditions.
Investors are paying closer attention to rental yields right now. With vacancy rates at around 1.1% nationally, the income side of the equation looks quite different to what it did a couple of years ago.
Rate cycles come and go. The fundamentals that drive long-term property value, scarcity, location, owner-occupier demand, population growth, do not shift because the RBA moved 25 basis points.
If you want to talk through how any of this lands for your own situation, I am always happy to have a no-pressure chat.
David Chu
Founder and Director
The Buyers Ally
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