The Reserve Bank of Australia (RBA) left the cash rate at 4.35% in August, marking its second consecutive meeting without a change.
For borrowers, however, “on hold” doesn't mean nothing is happening.
Since the RBA’s decision, inflation data has potentially strengthened the case for another rate rise, economists have shifted their forecasts and lenders have continued adjusting home loan rates as they compete for borrowers.
The next RBA decision isn't until 29 September. If you’re considering refinancing, upgrading or investing before then, there is plenty happening in the mortgage market already.
This article is general information only and does not constitute financial, legal or tax advice. We recommend seeking advice from a qualified accountant, solicitor and licensed financial adviser before making any decisions.
Why did the RBA leave rates on hold in August?
The RBA held the cash rate at 4.35% on 11 August, its second hold in a row after three increases earlier in the year fully reversed 2025’s rate-cutting cycle. Inflation was still too high for comfort, but the Board wasn’t ready to call its tightening cycle finished either. Minutes from the meeting showed it remained alert to upside risks and ready to act if they materialised.
And some of the data released since then have made those risks harder to ignore.
Inflation has put another rate rise back on the table
Australia’s annual headline inflation rate eased from 3.8% in June to 3.5% in July, according to the Australian Bureau of Statistics (ABS).
Normally, falling inflation would be welcome news for borrowers. The problem is what’s happening underneath that headline number. Trimmed mean inflation – which strips out some of the more volatile price movements to give the RBA a better indication of underlying inflation – remained unchanged at 3.6%.
Consumers are also still spending. ABS data showed household spending increased 1.1% in July and was 7.0% higher than a year earlier, the strongest annual growth since June 2023. For the RBA, strong spending can be a sign that demand in the economy remains high enough for businesses to keep raising prices. Higher interest rates are supposed to cool that demand, so continued strength in household spending may suggest the three rate rises earlier this year have not yet done enough.
The economy has also proved more resilient than expected, with GDP rising 0.4% over the June quarter and 2.1% over the year, according to the ABS. A stronger economy gives the RBA more room to raise rates if it believes another increase is needed to bring inflation under control, whereas a rapidly weakening economy would make another hike harder to justify.
None of these figures guarantees a September rate rise. But persistent underlying inflation, strong consumer spending and continued economic growth all strengthen the argument for the RBA to consider doing more.
Wages and employment tell a slightly different story
The RBA also watches the labour market closely. The ABS’s wage price index increased 0.8% in the June quarter and 3.2% over the year. Annual wage growth has therefore eased from 3.4% a year earlier.
Slower wage growth is important because wages are one of the factors that can keep inflation elevated, particularly in labour-intensive service industries. If wage pressures are easing, that gives the RBA less reason to raise rates than it would have if wages were continuing to accelerate.
At the same time, unemployment increased from 4.4% in June to 4.5% in July. A gradual rise in unemployment can be another sign that higher interest rates are having their intended effect. As demand slows, businesses may become more cautious about hiring, which can reduce wage pressures and, eventually, inflation.
That leaves the RBA balancing two competing signals. Inflation and household demand suggest the economy may still need further cooling, while slower wage growth and higher unemployment suggest some of the previous tightening is already working.
The next labour force data will be released before the September meeting, giving the Board another important piece of the puzzle.
What are lenders doing while the RBA waits?
This is where things get particularly interesting for borrowers. Even as the prospect of another RBA increase has grown, competition between lenders has continued. Recent Canstar analysis found over 30 lenders had cut variable home loan rates, with more than 50 lenders advertising at least one variable rate below 6%.
That creates an unusual situation. The official cash rate hasn’t moved since June and economists are currently debating another increase, but some borrowers may already be able to secure a lower mortgage rate by changing products or lenders.
It is a useful reminder that the RBA cash rate and the rate on your mortgage are related, but they aren’t the same thing. Lenders price loans based on funding costs, competition, risk, customer type, loan-to-value ratio and their own appetite for new business. You don’t necessarily need an RBA rate cut to get a more favourable home loan rate.
What should borrowers expect before 29 September?
At this stage, another rate increase is a real possibility. NAB has forecast a September increase, while Commonwealth Bank and ANZ have expected another rise by November. Financial markets have also moved towards pricing a greater likelihood of further tightening.
But there is still important information to come before the Board meets. That means borrowers shouldn’t structure their finances around confidently predicting what the RBA will do on 29 September.
A more useful question is what you can control now. If you’re already paying materially more than competitive rates available to borrowers with a similar profile, waiting several weeks for the RBA may achieve very little. Your existing lender also isn’t required to wait for an RBA meeting before changing the pricing available to new customers.
Should you wait for the next RBA meeting before refinancing?
There can be a temptation to wait when another RBA decision is only a few weeks away. If rates rise, however, waiting won’t necessarily leave you in a better position. And if the RBA holds, that doesn’t guarantee your lender will offer you a more favourable deal.
For someone with a large mortgage, even a relatively small difference in interest rates can add up. On a $1 million loan, for example, a 25 basis point difference in rate equates to roughly $2,500 in interest over a year before allowing for changes in the loan balance.
That doesn’t mean refinancing will always make sense. The costs, loan features and structure of your existing lending all need to be considered. But with lenders continuing to compete for borrowers, it can be worth checking whether your current loan is still competitive rather than waiting for the next RBA announcement.
The same applies if you’re preparing to buy, upgrade or invest. Instead of trying to predict the September decision, look at whether the numbers work at today’s rates. Lenders will also assess your application using a mortgage serviceability buffer, generally testing your ability to repay at around three percentage points above the proposed loan rate.
The next RBA meeting will be important, but it isn’t the only thing determining what you’ll pay for your mortgage. Knowing what lenders are willing to offer you now can be more useful than waiting for another RBA headline.
This article is general information only and does not constitute financial, legal or tax advice. We recommend seeking advice from a qualified accountant and solicitor before making any decisions.
Want to know how your current rate compares with what’s available? Speak to the team at AXTON Finance. Call 03 9939 7576, email getabetterrate@axtonfinance.com.au or get in touch today.
