Will Rates Rise Tomorrow? What the Feb 2026 Decision Means for Melbourne Buyers

The "Wait and See" Is Over

Tomorrow afternoon (Tuesday, Feb 3), the Reserve Bank will make its first—and arguably most critical—interest rate decision of 2026.

For the last six months, the cash rate has held at 3.60%, giving buyers in Vermont South and Pakenham a sense of stability. However, with December inflation figures coming in slightly "hotter" than the RBA wanted, the market is now pricing in a substantial chance of a 0.25% hike tomorrow, taking the cash rate to 3.85%.

If you are currently house hunting, you need to know exactly what this means for your Saturday auctions.

Director's Update: "My phone has been running hot this morning with buyers asking if they should pause. My answer is 'No.' If you are buying a family home for the next 10 years, tomorrow's rate decision is a blip on the radar. The bigger risk is being priced out of the suburb entirely by waiting too long." — Luke Fornieri

Scenario A: The RBA Hikes to 3.85%

If the RBA pulls the trigger tomorrow, borrowing capacities will shrink overnight.

• The Impact: A family with a $1M pre-approval today might see that drop to roughly $960,000 by Wednesday.
• The Opportunity: Paradoxically, a rate hike often scares off the "nervous money." We saw this in 2023—when rates rose, open home numbers dipped for 2 weeks. That 2-week window is when the smart buyers in Berwick and Officer swooped in with less competition.
• The Advice: If you have a live pre-approval, use it. Most lenders will honour a pre-approval rate for 90 days, even if the RBA hikes. Check this with your broker immediately.

Scenario B: The RBA Holds at 3.60%

If they hold, expect a surge in confidence.

• The Impact: Buyers who were "sitting on their hands" fearing a hike will rush back into the market next weekend.
• The Prediction: We expect clearance rates in the inner-east (Prahran, Malvern) to jump significantly next Saturday if the rate holds, as the fear of "higher repayments" evaporates for another month.

Why "Timing the Market" is Failing in 2026

Whether the rate is 3.60% or 3.85%, the fundamental problem in Melbourne's South East remains Supply. There are simply not enough family homes in the Vermont Secondary College zone or the Frankston High zone to satisfy demand.

While buyers obsess over a 0.25% rate change, property prices in high-demand pockets are moving up by 5-10% annually.

• Math check: Waiting 12 months for rates to drop might save you $100 a month in interest, but if the house price goes up by $80,000, you have lost significantly more than you saved.