The Reserve Bank of Australia (RBA) left the cash rate at 4.35% today, its second hold in a row and the level it has sat at since May. The decision was unanimous. It surprised nobody: all four major banks forecast a hold, and none expects another move this year.

The rate is the least surprising thing in today’s announcement. The cash rate is the headline interest rate the RBA sets, and it flows through to what banks charge on mortgages and pay on savings. It has now been at a 12-year high for three months, and its pinch on borrowing power reaches every capital at once.

The chart above tracks the RBA’s cash rate target from 2021 to today. It shows a full round trip: near zero until May 2022, up to 4.35% by November 2023, three cuts through 2025 down to 3.60%, then three hikes between February and May this year that put every one of those cuts back. Today’s hold keeps it there.

Why the Board held

The RBA’s job is to get inflation back inside its 2% to 3% target band. The June figures from the Australian Bureau of Statistics (ABS) gave it room to wait: prices rose 3.8% over the year to June, down from 4.0% the month before, and the RBA’s preferred measure of underlying inflation held steady at 3.6%. Still too high, but no longer climbing.

That matters because the Board has spent 2026 warning it would act again if needed. June’s statement said the Board would do what it considers necessary, “including increasing the cash rate target further if required”. Today’s statement keeps that stance but narrows the condition, warning it could raise rates further “if upside risks materialise”, which ties any future hike to inflation running hotter than expected. The Bank’s updated forecasts, published alongside the decision, don’t have inflation back near the middle of that target band until late 2027, and project unemployment rising to 4.8% by the end of 2028.

What the major banks expect next

All four major banks expected today’s hold, and all four think the cash rate stays at 4.35% for the rest of 2026. Where they split is 2027.

Heading into the meeting, Commonwealth Bank (CBA), Westpac, NAB and ANZ each forecast a hold and no change before year’s end. One caveat: these are pre-decision calls. None of the four had published an updated view after today’s statement when this piece went out, so treat them as the market’s starting point, not its reaction.

The chart above lines up where each bank sees rates going. They agree on the rest of 2026 and split on 2027. CBA expects the first cut soonest, pencilling in two for next year starting around May. NAB sees cuts beginning from the middle of 2027, and Westpac later again, in August. ANZ is the outlier: it has the rate holding at 4.35% right through 2027, with no cut at all in its base case. CBA and Westpac both still flag a small chance of one more hike in November if inflation picks back up.

Nobody sees relief in 2026. The debate is whether the first cut lands in the middle of 2027 or the end of it, and, in ANZ’s case, whether it comes next year at all.

A slowdown in three stages

There is a national figure, but here it hides more than it shows: it blends Perth, up 20.5% over the past year, with Melbourne, down 2.8% over the same year, into an average that describes no city anyone actually lives in. The real story is in the capitals themselves: one slowdown, moving through them in stages.

Stage one is the expensive end. Sydney fell 1.4% in July and Melbourne 1.2%, both monthly falls, and both are now below where they were a year ago (Sydney down 2.0% and Melbourne down 2.8% over the year). Canberra is close behind, down 1.0% for the month, while its annual growth has shrunk to 1.0%.

Stage two arrived in July. Brisbane and Adelaide posted their first monthly falls of this cycle, down 0.6% and 0.2% for the month, even though both remain well up over the year (Brisbane 14.8%, Adelaide 10.5%).

Stage three is the holdouts. Darwin (up 0.8% for the month), Perth and Hobart (each up 0.1%) are still rising in July, and those are monthly gains. The momentum tells the real story though: Perth was growing 2.3% a month in February. Its July gain rounds to almost nothing.

One thing is true in all eight capitals: every one has slowed from its fastest pace this year. Borrowing power shrinks when rates sit this high, and that squeeze reaches the most expensive markets first. But this squeeze works mainly through what buyers can borrow. It does nothing to build the homes the market is still short of, so that shortage is still here.

For borrowers, today changes nothing. Repayments stay where the May hike put them, and the ABS has already measured this year’s squeeze: mortgage interest charges rose 8.2% in the June quarter alone as banks passed on the February, March and May increases. For buyers, the calculus has shifted for the first time since 2022, because prices in most capitals are no longer running away from a saved deposit. For owners, it depends entirely on the city: Perth and Brisbane owners are still sitting on double-digit annual gains, while Sydney and Melbourne owners are watching values drift back toward last year’s levels.

The regions hold up better

The regions have been the year’s outperformer: regional home values are up 9.7% over the year, well ahead of the 3.9% across the combined capitals. Regional markets stayed hot while the capitals cooled.

The regional slowdown is real, but uneven. The combined regional index slipped 0.2% in July, its first monthly decline of 2026, with growth fading month after month from 1.1% in March. Underneath that headline the regions are split: the big eastern markets have tipped into falls while the west and south are still rising, roughly two months behind the same pattern in the capitals.

The eastern markets tipped over first: regional New South Wales (−0.4% for the month), Victoria (−0.3%) and Queensland (−0.3%) all edged lower in July, though each still holds annual gains between 6% and 12%. Still rising are the west and south: regional South Australia (+1.4% for the month), Western Australia (+0.9%) and Tasmania (+0.1%).

For buyers priced out of the capitals, the regions have been the release valve, and in the west and south they still are. The borrowing-power squeeze is reaching regional Australia, but unevenly and on a lag, not as a single front.