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In a unanimous decision, the Reserve Bank of Australia (RBA) announced it would hold the official cash rate at 4.35 per cent.
This is the second time this year the RBA has opted to hold the cash rate, following three consecutive hikes in February, March, and May.
The decision was broadly expected, with the major banks forecasting a hold, proceeded by a gradual easing towards the latter half of 2027.
The RBA said the decision was motivated by the fact that “financial conditions are now tighter than they were, and the economy appears to be slowing as expected“.
“With monetary policy judged to be somewhat restrictive, the Board decided to leave the cash rate target unchanged while it assesses how the economy is evolving,” it added in its decision statement.
Despite the call, the RBA acknowledged that inflation remained above its 2–3 per cent target band and was “focused on ensuring that high inflation does not become embedded“.
In the 12 months to June 2026, the consumer price index (CPI) rose 3.8 per cent, down from 4 per cent in the year to May and from its peak of 4.6 per cent in the year to March.
Trimmed mean inflation remained at 3.6 per cent over the same period, unchanged from May.
The decision comes during a tricky time for Australia’s housing market, with applications plummeting and brokers reporting reduced activity.
The last time the cash rate sat at 4.35 per cent, it remained unchanged for more than a year, after the RBA lifted it to that level in November 2023 and held it there until February 2025.
Decision reasoning
The RBA said that the decision to hold the cash rate had been motivated by tightening financial conditions and signs that the economy was slowing as a result of the three previous rate hikes.
The central bank also pointed to a shift in momentum across the housing market, noting in its decision that “housing prices are falling in some capital cities and new housing loans declining noticeably”.
“There are signs that consumer spending growth is slowing gradually as expected, while growth in business debt and investment is strong,” it said.
However, inflation remained a point of issue for the RBA, with the board warning that the disruption to global oil supply was adding to inflationary pressures.
“The disruption to global oil supply is adding directly to inflation and there are indications that higher fuel prices are being passed through to prices of other goods and services, so inflation is likely to remain high for some time,” it said.
Little hope was left for rate cuts this year, with the RBA saying that it did not expect inflation to return to its target range until late 2027, with “upside risks to this projection”.
It said: “The Board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if upside risks materialise.”
Confidence returns tentatively
With rates remaining at 4.35 per cent, brokers speaking to Broker Daily said that while borrowing capacity remains a key issue, the call has brought a degree of certainty to the market in the medium term.
“From my perspective, the key takeaway is stability,” Nathan Osinski, director of Osinski Finance, said.
“Borrowers have had to navigate a lot of uncertainty over the past few years, so a period where rates aren’t constantly moving gives people a chance to plan ahead with a bit more confidence.”
Osinski added that while a hold wouldn’t add any capacity or make property more affordable, it may help encourage people who were waiting on the sidelines back into the property market.
“We’ve seen plenty of clients over the past 12 months who were less concerned about the actual rate and more concerned about not knowing where rates were heading next. A stable rate environment helps people feel more comfortable moving forward with a purchase, refinance or investment decision,” Osinski said.
“For buyers who have been sitting on the fence, today’s decision may be the nudge they need to start having conversations and exploring their options.”
Similarly, Paolo Llave, senior broker for Berti Finance, said: “When people have a better idea of what their repayments and borrowing capacity are going to look like, it’s much easier to make a decision. When rates keep moving, people naturally become a bit more hesitant.
“We’re already seeing the market soften in some areas, so if rates stay steady for a while, I think it could give buyers who’ve been sitting on the sidelines a bit more confidence to get back into the market.”
Melanie Smith, franchisee for Aussie Windsor, added that the call would help her clients “feel like the goalposts have stopped moving” and would resultantly tempt them back into the market, although affordability and borrowing capacity were still holding buyers back.
“We’re also about to head into the spring selling season, so a little rest from the RBA would be very welcome,” Smith said.
Mortgages slump
The decision comes amid a challenging time for the mortgage market.
According to new data from credit reporting bureau Equifax, Australian mortgage demand has fallen for the fourth consecutive month, with July’s decline extending across every state and all borrower age groups.
Overall mortgage demand was 16.4 per cent lower year on year in July, following declines of 0.9 per cent in April, 6.6 per cent in May, and 18.8 per cent in June.
The slowdown is being felt among lenders and brokers too. At Westpac, monthly mortgage applications fell 11 per cent quarter on quarter to 29,000 in 3Q26, while National Australia Bank (NAB) revealed that total Australian home lending applications dropped 15 per cent over the same period.
Broker group Loan Market found mortgage applications had fallen 26 per cent by volume and 23 per cent by value between early February 2026 and the end of June.
Osinski said that the degree of certainty that the call had added could help coax the mortgage market back into activity.
“Stability generally leads to more inquiry, more buyer activity and more people reviewing their lending position,” Osinski said.
“It also creates a good opportunity for borrowers to review their current loan, because many lenders remain very competitive when they’re looking to attract new business.”
Llave added that the higher rate environment and slowdown in mortgage activity did give borrowers a stronger hand when it came to refinancing and capitalising on increased lender competition.
“For my clients, the conversation has changed a lot. It’s not just about how much they can borrow anymore,” he said.
“We’re spending more time looking at cash flow, how the loan is structured, whether refinancing makes sense and making sure they’re not paying more interest than they need to.
“Even with the hold, there’s still plenty happening between lenders. Banks are competing for business and pricing loans differently, so borrowers shouldn’t necessarily sit around waiting for the RBA to cut rates. There can still be opportunities to get a better deal now.”
[Related: NAB business lending hits 4-year high as home loan demand softens]
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