Reserve Bank of Australia Lifts Cash Rate to 4.35% in May 2026

The decision to raise the cash rate comes in response to persistent inflationary pressures within the Australian economy. In March 2026, inflation reached 4.6%, driven largely by surging automotive fuel prices, which have had a cascading effect on the cost of goods and services nationwide.

For borrowers, this rate increase translates to higher interest rates on various loan products, including mortgages and car loans. Homeowners with variable-rate mortgages can expect an uptick in their monthly repayments. For instance, a borrower with a $600,000 mortgage may see an approximate increase of $91 in their monthly payments due to this latest hike. When combined with the previous increases in February and March, this amounts to an additional $272 per month compared to the start of the year.

Car loan borrowers are also affected. Secured car loans, which often adjust more swiftly to changes in the cash rate than mortgages, are likely to see interest rates rise. As of early May 2026, indicative broker-panel rates for prime borrowers on a $40,000 secured car loan over five years range between 7.45% and 8.95%, depending on factors such as the age of the vehicle and the loan-to-value ratio. Dealer finance rates for similar profiles are typically higher, ranging from 9.95% to 11.50%.

It's noteworthy that some lenders continue to offer discounts for electric vehicles (EVs). These green loan discounts, ranging from 0.50% to 1.00%, have remained intact despite the recent rate hikes. Therefore, borrowers considering the purchase of an EV may still benefit from more favorable financing terms compared to those purchasing internal combustion engine vehicles.

In light of these developments, borrowers are encouraged to review their current loan agreements and consider refinancing options to secure more favorable rates. Consulting with financial advisors or mortgage brokers can provide tailored advice to navigate the evolving interest rate landscape.

As the RBA continues to monitor economic indicators, further adjustments to the cash rate may occur. Staying informed and proactive in managing loan commitments will be crucial for borrowers aiming to mitigate the impact of rising interest rates on their financial well-being.