Interest Rates on Hold, But the Pressure Is Not Over Yet

The Reserve Bank of Australia held the official cash rate at 4.35% at its June 2026 meeting, a pause that most economists expected, but it is not finished. 

For households, businesses, and anyone with a mortgage or investment loan, understanding where rates are and where they may be headed is important for planning the months ahead.

What Has Happened This Year

The RBA lifted the cash rate three times in 2026 (in February, March, and May), pushing it from 3.85% at the start of the year to the current 4.35%. Each increase of 0.25 percentage points was driven by inflation returning to levels higher than the RBA had forecast, compounded by rising fuel prices linked to the conflict in the Middle East and stronger-than-expected pressure in the labour market.

The decision to hold in June was widely anticipated. RBA Governor Michele Bullock, speaking after the announcement, was direct: the three consecutive rate rises had been difficult for borrowers, but were necessary to slow demand and bring inflation under control. The pause is designed to give the Board time to assess how those increases are flowing through the economy and it is not a signal that the tightening cycle is over.

What Could Happen Next

The next RBA meeting is scheduled for August 2026, when the Board will review the June quarter inflation data. That data will be the key input into any decision about whether to hold, raise, or eventually begin cutting rates.

Some suggest a further rate rise in August remains possible if inflation data surprises to the upside. A small number of lenders have already begun reducing some variable home loan rates independently of the RBA, reflecting competition for new borrowers rather than any broader shift in the interest rate environment.

What This Means for Borrowers

For anyone with a variable rate mortgage, the hold in June means no immediate change to repayments. However, the cumulative effect of three rate rises this year is already significant. A borrower with a $600,000 loan and 25 years remaining is paying meaningfully more each month than they were at the start of 2026.

The pause also provides a useful moment to review your current loan. Lenders are actively competing for quality borrowers, and the gap between what existing customers pay and what new customers are being offered can be substantial. A review of your home loan now, while rates are on hold, may identify savings that are worth pursuing before conditions change again.

What This Means for Businesses

Higher interest rates affect businesses in a number of ways. Financing costs are elevated, consumer spending on discretionary items has softened, and the cost of carrying any form of debt, including ATO debt, has increased.

For businesses planning to invest in equipment, property, or expansion, the cost of borrowing is a material factor that needs to be modelled carefully. The right answer depends on your specific circumstances, your existing debt position, and the expected return on the investment.

What to Do Right Now

The current environment rewards those who are proactive rather than reactive. Some practical steps worth considering:

• If you have a variable rate mortgage, ask your lender what rate you are actually paying and compare it to current offers for new customers – then negotiate or refinance if there is a meaningful gap
• If your business is carrying ATO debt, explore whether it can be cleared – the cost of holding it has increased
• If you are considering a significant borrowing decision – investment property, business expansion, equipment – model the scenario at current rates and consider what would happen if rates move by a further 0.25% in either direction
• Build buffer into your cash flow planning for the second half of 2026, given that the August meeting remains live

Interest rate decisions affect mortgages, business loans, investment decisions and financial plans. If you are unsure how the current rate environment affects your situation, Simmons Livingstone can help you think it through. Call 1800 618 800 or email admin@simmonslivingstone.com.au.