Preparing Your Mortgage for a 4.35% Cash Rate: Practical Steps to Take Now
Two More Hikes Are on the Table
The RBA raised the cash rate to 3.85% in February, and the big four banks aren’t expecting them to stop there. CBA, NAB, and Westpac are all now forecasting hikes in both March and May 2026, which would push the cash rate to 4.35%.
The driver? Inflation is running hotter than expected, fuelled by surging oil prices and a tight labour market. RBA Deputy Governor Andrew Hauser has signalled the data supports further tightening, and the market is pricing it in.
If you have a variable rate mortgage, here’s what to do before the increases hit your repayments.
Calculate the Impact on Your Repayments
Before anything else, know the numbers. A 0.50 percentage point increase (from 3.85% to 4.35%) on common loan sizes looks roughly like this:
| Loan Balance | Monthly Increase (approx.) |
|---|---|
| $400,000 | $120-$130 |
| $500,000 | $150-$160 |
| $600,000 | $175-$190 |
| $750,000 | $220-$235 |
| $1,000,000 | $295-$315 |
These are approximate figures based on a 30-year principal and interest loan. Your actual increase depends on your lender’s margin and how quickly they pass on the full rate change.
Seven Steps to Prepare
1. Stress-Test Your Budget Now
Don’t wait for the rate rise to find out if you can afford it. Add the estimated increase to your current repayment and see how your monthly budget looks. If it’s tight, you have time to adjust spending before you’re forced to.
2. Build a Rate Rise Buffer
If you have an offset account or redraw facility, try to build a buffer equivalent to at least three months of the higher repayments. This gives you breathing room if the increases coincide with unexpected expenses.
3. Review Your Discretionary Spending
Look at subscriptions, dining out, and non-essential purchases. Most households can find $100-$200 per month in savings without drastically changing their lifestyle. That might be enough to cover the increase entirely.
4. Check Your Loan Is Still Competitive
Banks are competing hard for mortgage customers. If you’ve been on the same loan for more than 12-18 months without reviewing it, there’s a good chance you’re paying more than you need to. Even a 0.20% reduction in your margin can offset a chunk of the rate increase.
5. Consider Your Loan Structure
If you’re on a variable rate and the uncertainty is causing stress, a partial fix might help. Splitting your loan between fixed and variable gives you some certainty on a portion of your repayments while keeping the flexibility of variable on the rest.
6. Don’t Forget About Other Debt
Credit cards, personal loans, and car finance all become more expensive as rates rise. If you’re carrying other debt, prioritise paying down the highest-interest balances first. Consolidating into your mortgage might reduce your overall interest cost (though it stretches the repayment over a longer term, so do the maths carefully).
7. Talk to Your Lender Early
If you think you’ll struggle with higher repayments, contact your lender before you miss a payment. Banks have hardship provisions and can offer temporary solutions like interest-only periods or extended terms. Reaching out early gives you more options than waiting until you’re behind.
Should You Fix Your Rate?
The honest answer: it depends. Fixed rates already factor in expected increases, so you won’t necessarily save money by fixing now. But if certainty matters more to you than potentially saving a few dollars, fixing gives you predictable repayments for the term.
A mortgage broker can compare your current deal against what’s available in the market and model the scenarios. It’s worth the conversation, especially if your loan is more than a year old.
The Bigger Picture
Rate rises are uncomfortable, but they’re a normal part of the economic cycle. Australia’s household debt is among the highest in the world, which means rate changes have an outsized impact here compared to other countries. The best defence is preparation: know your numbers, review your loan, and have a buffer.
Frequently Asked Questions
When is the next RBA rate decision?
The RBA's March 2026 meeting concludes on 18 March. Major banks including CBA, NAB, and Westpac are forecasting a 0.25% increase, taking the cash rate to 4.10%.
How much will my mortgage repayments increase at 4.35%?
On a $600,000 variable mortgage over 30 years, the increase from 3.85% to 4.35% would add roughly $175-$190 per month to repayments, depending on your lender's margin.
Should I fix my mortgage rate now?
It depends on your circumstances. Fixed rates already factor in expected increases, so they may not save you money. A mortgage broker can compare your current deal against what's available and help you decide.
