Interest Rates · May 2026
RBA Rate Decision May 2026 — What It Means For Your Home Loan
The Reserve Bank of Australia cut the cash rate at its May 2026 meeting, bringing the official rate to 3.85%. For the roughly 1.5 million Australians with variable-rate home loans, this is meaningful news — but the real impact depends on what your lender passes on, and whether you're on the right loan in the first place.
What Did the RBA Actually Decide?
The RBA Board voted to reduce the cash rate target from 4.10% to 3.85% — a 25 basis point cut. This follows a series of cuts since mid-2025 as inflation moderated back toward the 2–3% target band. The Board noted that while consumer price growth has eased, persistent services inflation and a resilient labour market mean the cutting cycle will remain measured rather than aggressive.
How Much Will Repayments Fall?
On a $700,000 variable-rate loan with 25 years remaining, a full 25bp pass-through from your lender reduces monthly repayments by approximately $110–$120 per month. Over the life of the loan, the savings compound further if rates continue to ease.
However, the key word is if your lender passes it on in full. Major banks historically pass on RBA cuts in full within a few days. Some smaller lenders take longer. A handful hold back a few basis points. Now is a good time to check your current rate against what's available in the market.
Fixed vs Variable: What Should You Do Now?
If you're on variable: Your rate should drop automatically once your lender announces its response to the cut. If they don't pass on the full 25bp, or if your rate was already above the market average before this cut, it's a strong trigger to review your loan.
If you're on fixed: Your rate won't change until your fixed period ends. If your fix expires in the next 6–12 months, start planning now. Fixed rates for new borrowers have already priced in expected future cuts, meaning the gap between fixed and variable is narrower than you might expect.
If you're thinking about fixing: With markets pricing in further cuts through 2026, fixing right now means locking in a rate that might not be the lowest point of the cycle. Splitting your loan (part variable, part fixed) is a popular strategy that hedges both scenarios.
What Is a Good Variable Rate Right Now?
With the cash rate at 3.85%, competitive variable rates for owner-occupiers paying principal and interest sit in the 5.89%–6.19% range (comparison rate). If you're paying more than 6.3%, there's a strong chance you could refinance to a materially better rate.
Bridge Finance works with 70+ lenders and can run a rate comparison for your specific loan in minutes — no commitment required. Book a free 30-minute conversation with William to see what rate you could access.
Quick Rate Check — 3 Questions
1. What rate are you currently paying?
2. Has your lender passed on the last two RBA cuts in full?
3. Has your property value increased since you last borrowed?
If your answer to Q2 is "I'm not sure" or Q3 is "yes" — you likely have refinancing options worth exploring.
About the Author
William Zhu
Director, Bridge Finance. 8 years of mortgage broking + 5 years in construction. $600M+ settled. Access to 70+ lenders. MFAA member.
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© 2026 Bridge.Finance Pty Ltd ATF Zhu Family Trust. Credit Representative 567817 of Australian Credit Licence 384704. MFAA Member. AFCA Member.
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