RBA Raises Cash Rate to 4.85%: An 18-Year High, Confirmed

A Split Board and a Rate Not Seen Since 2008

The Monetary Policy Board lifted the cash rate target by 25 basis points to 4.85% at its meeting on 3 November 2026, the Melbourne Cup Day decision. Six members voted for the increase; three voted to hold at 4.60%. That 6-3 split is the closest vote of the year, confirming the two-two bank split and the market uncertainty that had built through October.

Notably, the statement dropped the explicit warning carried in September about raising the cash rate further if needed. Governor Michele Bullock said the board is not trying to push the economy into recession if it can avoid it, while Deputy Governor Andrew Hauser, whose October comments helped shift market pricing toward this outcome, warned that some businesses now treat 3% to 3.5% inflation as the new normal, calling that mindset a "central banker's nightmare."

Why the RBA Hiked Again

The board's statement pointed to four reinforcing pressures. Underlying inflation is broadly based and is now expected to remain above 3% for the coming year, a mark the RBA says is "around three quarters later than previously forecast" to return to target. There is also an increasing risk that higher inflation expectations become embedded in wage and price-setting behaviour.

Capacity pressures in the economy are a little tighter than previously estimated, and higher fuel prices are passing through into other goods and services. The Middle East conflict and the resulting disruption to global oil supply are keeping energy costs elevated, while growth among Australia's major trading partners has been stronger than expected, partly driven by AI-related investment. At the same time, unemployment has risen and is projected to climb further than the RBA's August forecasts anticipated, even as employment keeps growing overall.

What Five Hikes in One Year Have Cost Borrowers

Four hikes had already added up to $606 a month on a $1 million loan. This fifth hike extends that further, and the dollar impact scales directly with loan size.

For a full breakdown of a $1,000,000 owner-occupier loan against a $1,000,000 investment loan, including how interest-only lending moves differently, see our companion article on what the November rate rise costs on a $1 million loan.

How the Banks Are Responding

Smaller lenders moved first, as they typically do. Teachers Mutual Bank, UniBank and Australian Mutual Bank each confirmed a full 0.25% increase on variable home loans, effective 12 November, nine days after the decision. Macquarie Bank confirmed the same increase, effective 19 November.

With 40 lenders passing the September hike through in full and 21 lifting fixed rates above 6%, this cycle has shown near-universal, rapid repricing. If that pattern holds again, borrowers with a major bank should expect a formal notice within the coming week.

What Happens Next

The RBA's next decision falls on 8 December 2026, and economists are not aligned on what comes after that. Some expect a hold in December with a possible sixth hike in February 2027, with two further increases in the first half of next year not ruled out. Others take a softer view, expecting the board to adopt a wait-and-see approach over the summer, while leaving the door open to further tightening if inflation does not return to target within a reasonable time.

The key data point to watch is the ABS monthly CPI indicator due 25 November, which will show whether price growth is still accelerating or beginning to cool. That release could determine whether 4.85% turns out to be the peak for this cycle or another staging point on the way toward 5%.

What Mortgage Holders Should Do Now

With the big four yet to confirm their pass-through, there is a short window to act before the new rate lands on your account.

• Call your lender before the hike lands. Lenders routinely offer loyal customers a discount of 0.10% to 0.40% to avoid losing them, especially once a competing quote is on the table.
• Get a refinance comparison now. The spread between the sharpest and weakest variable rates on the market remains wide, and cashback offers of $2,000 to $4,000 are still common.
• Stress-test your budget against a possible sixth hike. Use our mortgage stress calculator to see how another 0.25% would affect your household budget before it happens.
• Review your offset and redraw balances. Every dollar sitting in a 100% offset account now effectively earns you 6%+ (your variable rate), risk-free.
• Consider a split loan rather than fixing everything. Fixed rates already price in expectations of future moves, so a mix of fixed and variable can balance protection with flexibility.