RBA’s February Decision: Navigating the Cash Rate Outlook for Your Aussie Mortgage
The Reserve Bank of Australia (RBA) plays a pivotal role in shaping Australia’s economic landscape, and its monthly cash rate decisions are keenly watched by homeowners, aspiring buyers, and business owners alike. As we head into February 2026, the anticipation surrounding the RBA’s first Monetary Policy Board Meeting of the year is palpable, with many economists now forecasting a potential shift in the cash rate.
For Australians with a mortgage, property investors seeking finance, or business owners planning their next move, understanding what this decision could mean for your finances and the broader economy is crucial. At SBS Lending, we believe in empowering our clients with clear, timely, and expert financial insights.
What Exactly Does the RBA Do?
Before diving into the predictions, it’s worth a quick recap on the RBA’s fundamental role. The Reserve Bank of Australia serves as the nation’s central bank, tasked with a critical mandate outlined in the Reserve Bank Act 1959. Its overarching objective is to promote the economic prosperity and welfare of the Australian people.
To achieve this, the RBA focuses on three key objectives:
•Stability of the currency: Primarily interpreted as maintaining price stability, with a flexible inflation target of 2–3 per cent, on average, over time.
•Maintenance of full employment: Aiming for the highest sustainable level of employment.
•The economic prosperity and welfare of the people of Australia.
The RBA’s primary tool for influencing the economy is by setting the cash rate. This is the interest rate on overnight loans between commercial banks, which then flows through to other interest rates across the financial system, including home loans and business lending.
The Current Landscape: Heading into February 2026
As of December 2025, the RBA held the cash rate steady at 3.60 per cent. However, recent economic data and commentary suggest that the period of stability, or even the earlier rate cuts seen in early 2025, might be drawing to a close.
Inflation, a key driver of RBA decisions, has proven to be more persistent than anticipated. While headline Consumer Price Index (CPI) inflation eased slightly to 3.4 per cent in the 12 months to November 2025 (down from 3.8 per cent in October), the RBA’s preferred measure, trimmed mean inflation, remained above its 2-3 per cent target range at 3.2 per cent.
Alongside stubborn inflation, Australia has seen stronger-than-expected economic growth and a resilient consumer. The labour market, despite some slowing, remains quite robust, with the unemployment rate standing at 4.3 per cent. This combination of factors — inflation above target, solid economic growth, and a tight labour market — suggests the economy is potentially running “at its speed limit,” paving the way for the RBA to consider further tightening.
What to Expect from the February 2026 Decision
The RBA’s Monetary Policy Board is scheduled to meet on 2-3 February 2026, with the decision announced on 3 February. Many leading economists and major banks, including Commonwealth Bank, National Australia Bank, Citi, and TD Securities, are now forecasting a 0.25 percentage point cash rate *hike* at this upcoming meeting. Some even anticipate further hikes later in the year.
The December quarter inflation data, due out in late January 2026, will be a critical piece of information for the RBA board’s decision-making process. A higher-than-expected inflation print could solidify the case for a February rate hike.
However, not all experts are in complete agreement, with some still forecasting the cash rate to remain steady. This highlights the fine balance the RBA must strike: bringing inflation back to target without unduly stifling economic growth or employment.
How the February Decision Could Impact Your Mortgage
Any change to the RBA cash rate directly influences the interest rates offered by commercial banks, with significant implications for mortgage holders.
For Variable Home Loan Borrowers
If the RBA increases the cash rate in February, lenders are highly likely to pass on some, if not all, of this increase to their variable home loan customers. This would mean an immediate rise in your monthly mortgage repayments. It’s crucial to review your current interest rate and budget for potential increases. Even a 0.25 percentage point rise can add hundreds of dollars to annual repayments for larger loans.
For Fixed Rate Home Loan Borrowers
While your repayments remain fixed for the term of your loan, an RBA hike would likely see new fixed rates offered by lenders increase. For those whose fixed rate terms are expiring soon, or if you’re considering refinancing, the cost of securing a new fixed rate could be higher than anticipated. The RBA has noted that the average outstanding mortgage rate will continue to increase as low-rate fixed loans expire and reprice at higher rates.
For First Home Buyers
Rising interest rates can directly impact your borrowing capacity. Lenders assess your ability to repay a loan not just at the current rate, but also with a “serviceability buffer” (typically 3% above the current loan rate) to ensure you can manage higher repayments if rates increase. A higher cash rate means a higher stress test, potentially reducing the maximum amount you can borrow. Affordability remains a key challenge for many aspiring homeowners.
For Property Investors and Business Owners
Property investors with variable rate loans will face increased servicing costs, which can impact rental yields and overall cash flow. For those looking to expand their portfolio, higher rates translate to higher borrowing costs. Similarly, business owners relying on commercial loans will see their repayment obligations increase, potentially affecting investment decisions and operational budgets.
Broader Economic Implications
A rate hike signals the RBA’s commitment to reining in inflation. By making money more expensive to borrow, the RBA aims to cool consumer demand and slow down price growth. While necessary to achieve the inflation target, this can lead to:
•Moderated consumer spending: Higher mortgage repayments leave less disposable income for households.
•Slower economic growth: Businesses may defer investment decisions due to higher borrowing costs and reduced consumer demand.
•Job market adjustments: While the labour market remains strong, sustained tightening could see some softening.
How SBS Lending Can Help
Navigating a potentially changing interest rate environment can be complex and stressful. This is where the expertise of SBS Lending becomes invaluable.
•Personalised Advice: We’ll help you understand how the RBA’s decision specifically impacts your financial situation.
•Home Loan Reviews: For existing homeowners, we can review your current loan, compare it with hundreds of options from our panel of lenders, and help you explore refinancing opportunities to secure a more competitive rate or structure your loan more effectively.
•Borrowing Capacity Assessments: For first home buyers and investors, we can help you understand your current borrowing capacity and strategise the best approach to achieve your property goals.
•Business Lending Solutions: Business owners can benefit from our insights into commercial finance options that align with prevailing market conditions.
Don’t leave your mortgage or financial plans to chance. Understanding the RBA’s moves and having expert guidance can make all the difference.
External Resources:
•Reserve Bank of Australia (RBA): The official source for monetary policy statements, cash rate decisions, and economic data.
•Canstar: Provides insights into interest rate forecasts from major banks and general mortgage information.
•Commonwealth Bank (CBA) Economic Insights: Often provides detailed analysis and forecasts regarding RBA decisions and economic outlook.
•NAB (National Australia Bank) Economic Research: Offers economic forecasts and commentary relevant to RBA policy.
Disclaimer
The information provided in this blog is intended for general informational purposes only and should not be construed as legal, financial, or business advice. While we strive to provide accurate and up-to-date information, every business and individual’s situation is unique. Therefore, we strongly recommend seeking professional legal or financial advice tailored to your specific circumstances before making any decisions. Relying solely on the content of this blog without expert guidance may expose you to legal or financial risks.