On 5 May 2026 the Reserve Bank's Monetary Policy Board lifted the cash rate by 25 basis points to 4.35%, in an 8–1 vote. The dissenter wanted a 50bp move. Westpac's chief economist Luci Ellis read the statement as "further hikes this year remain likely".
For self-managing landlords, the question isn't "what does the macro mean" — it's "what does my bank account look like next month". Here's the answer.
The cashflow maths, per $100k of debt
A 25bp move on a variable investment loan adds roughly $250/yr in interest per $100k of balance. Scaled up:
| Loan balance | Annual interest increase | Monthly cash impact |
|---|---|---|
| $300,000 | $750 | $63 |
| $500,000 | $1,250 | $104 |
| $750,000 | $1,875 | $156 |
| $1,000,000 | $2,500 | $208 |
All of it is deductible against your rental income — but the deduction lands in next year's tax return, while the extra repayment comes out of this month's account. Your buffer needs to cover the timing gap.
The fixed-rate roll-off problem (still not over)
Roughly 30% of investor loans written during the 2021–2022 fixed-rate peak are still rolling off to variable over the next 18 months. The fixed rates being rolled off are typically 2.1%–2.6%; the variable rates they're rolling onto, after the May hike, are sitting around 6.7%–7.1% for interest-only investor product.
On a $500k loan, that's the difference between ~$11,500/yr in interest and ~$34,500/yr — a $23,000 swing.
What to do this month if you have a fixed rate expiring in 2026:
- Pull your loan documents and confirm the exact roll-off date.
- Get a written variation quote from your existing lender now, not in week-of.
- Get one comparison quote from a broker. Refinance costs (~$600 discharge + $400 mortgage registration) pay back inside the first month if you save 20bp.
- Run the new repayment through the negative gearing calculator so you know your after-tax cashflow before you sign.
Combine it with the Budget changes
The 12 May Budget added a second variable. From 1 July 2027:
- Negative gearing on established dwellings is restricted to new builds for losses incurred from that date.
- The 50% CGT discount is replaced with an inflation-indexation regime + 30% minimum tax on the discounted portion.
- Existing investors are grandfathered — anything you own before 1 July 2027 keeps the current rules indefinitely.
Full breakdown: Federal Budget 2026-27 — what it means for property investors.
The combination matters because it pulls in opposite directions:
- Rates up → cashflow worse → harder to hold marginal properties
- Grandfathering → strong incentive to acquire one more property before 1 July 2027 → buyers will be willing to pay more
If you were considering a final acquisition under the existing rules, the rate hike just made the buy-side cashflow harder, not easier. Run the numbers cold; don't run them on the assumption that rates "will come down".
Three things to do before 30 June
EOFY is five weeks away. The high-leverage moves at current rates:
1. Pre-pay your interest for FY2026-27
If you have surplus cash and your loan allows it, pre-paying up to 12 months of interest before 30 June pulls the deduction into this financial year — useful if your taxable income is higher this year than next. At 4.35% cash rate and ~6.9% investor variable, this is a meaningful amount.
2. Order a quantity surveyor depreciation schedule
If you haven't already, a QS report on a typical established investment property unlocks $3,000–$9,000/yr in Division 43 capital works + Division 40 plant deductions. The QS report itself (~$700) is deductible in the year you pay for it. At higher interest rates, this is the deduction most landlords are leaving on the table.
Checklist: Investment property tax deductions.
3. Book outstanding repairs
Anything you've been putting off — gutters, GPOs, a leaking tap, a flaking deck stain — is fully deductible the year it's paid. If you're a marginal-rate-47% taxpayer, every $1,000 of repairs is $470 back. Get the trades booked before 30 June.
Capital improvements vs repairs is where landlords most often get this wrong. Replacing a broken hot water unit with the same spec is a repair (deductible now). Replacing it with a heat pump is a capital improvement (Division 40, depreciated). When in doubt, ask your accountant before you spend.
The honest summary
Rates are higher than most 2021-vintage investor models assumed. The Budget has tightened the medium-term tax setting but grandfathered existing portfolios. The combination favours landlords who know their numbers and is brutal on those who don't.
PropAlly's PortfolioPulse rail now includes a rate-sensitivity card showing your projected interest at +0.25%, +0.50% and +1.00% over your current rate. Free on every plan, no setup required — log in and it's there.
— Tob
Nothing in this article is financial advice. Sources: RBA Media Release 2026-12 (5 May 2026), RBA Statement on Monetary Policy May 2026, Budget 2026-27 papers, Cotality Home Value Index April 2026.
