The Reserve Bank of Australia (RBA) sets the official cash rate, which directly influences mortgage rates, savings rates, and business lending across Australia. In 2026, the RBA has cut rates from the peak of 4.35% reached in late 2023, following the easing of inflationary pressures. Understanding how RBA rate decisions affect your mortgage, investments, and tax planning is essential for Australian homeowners and investors.
Current RBA Cash Rate in 2026
The RBA began cutting the cash rate in early 2025 as inflation returned closer to the 2-3% target band. As of mid-2026, the cash rate is significantly lower than the 2023 peak. The RBA Board meets eleven times per year and its decisions are announced on the Tuesday following each meeting, with the Governor's statement providing forward guidance on the rate outlook.
How RBA Rate Changes Affect Your Mortgage
When the RBA cuts the cash rate, variable-rate mortgage lenders typically pass on most of the reduction — but not always immediately or in full. In 2026, borrowers on variable-rate loans should:
- Compare their current lender's rate against market rates — refinancing can save $300-$1,000+ per month on a $600,000 loan
- Consider whether fixing part of the loan at current rates provides interest rate certainty
- Maintain repayments at the higher level even after rate cuts — the extra payments go directly to reducing principal
- Use rate cuts as an opportunity to increase offset account contributions
Interest Rate Impact on Investment Properties
For investment property owners, interest rate changes have both cash flow and tax implications:
- Lower rates reduce deductible interest: As rates fall, the interest cost on your investment loan decreases — reducing your tax deduction but improving cash flow
- Negative gearing positions may shift: Lower interest costs may move previously negatively-geared properties toward neutral or positive gearing
- Rental yield calculations change: Falling rates typically push property prices up, compressing rental yields on new purchases
- Refinancing opportunities: Rate cuts make it worth reviewing whether to refinance investment loans at lower rates
Tax Planning Around Interest Rates
Interest on money borrowed to produce assessable income — including investment property loans and margin loans — is tax deductible. In a falling rate environment, consider:
- Fixing loans to lock in deductible interest at known rates for forward planning
- Reviewing whether prepaying 12 months of investment loan interest before 30 June generates an immediate deduction
- Reassessing the impact of reduced interest deductions on your overall taxable income and marginal rate
Frequently Asked Questions
When does the RBA meet in 2026?
The RBA Board meets eleven times per year — typically on the first Tuesday of each month except January. Decisions and monetary policy statements are published on the RBA website (rba.gov.au) immediately after each meeting. The next meeting dates are listed on the RBA's official calendar.
Is mortgage interest tax deductible?
Interest on loans used for investment purposes — such as an investment property mortgage or margin lending for shares — is tax deductible. Interest on your home loan (main residence) is not deductible, as the property is not used to produce income. Mixed-use loans (partly home, partly investment) must be apportioned.
Should I fix or stay variable with my home loan in 2026?
This depends on your view of the rate outlook, your cash flow needs, and whether you anticipate making extra repayments. A mortgage broker can compare current fixed and variable rates, and a financial adviser or accountant can help model the after-tax impact on investment loans. Fixed rates may suit those wanting certainty; variable rates suit those wanting flexibility.
Want to understand how interest rate changes affect your tax position or investment strategy? Contact AWTS for tailored advice.
