RBA Predictions for 2026: What Borrowers Need to Know

Key Summary

• Leading economists are divided on whether the Reserve Bank of Australia (RBA) will hike or hold interest rates in 2026, as inflation remains above target.
• Major banks, led by CBA, have already increased fixed mortgage rates in anticipation of higher funding and borrowing costs.
• Borrowers on variable and fixed rate mortgages could face larger repayments if the RBA acts, making budgeting and loan reviews essential.

As we move into 2026, Australian homeowners and aspiring home buyers might be watching the Reserve Bank of Australia (RBA) with bated breath.

The conversation around interest rates is quite different to the talk of rate cuts that kicked off 2025. Whispers of potential rate hikes are growing louder, fuelled by stubborn inflation and moves by major lenders.

The economic signals are mixed, leaving experts divided. While some predict the RBA will hold the cash rate steady, others are forecasting one or more increases this year. Let’s break down the key factors influencing these predictions and what it all means for your household budget.

Banks and Lenders Moved First

Before the RBA has a chance to make its next move, some of Australia’s biggest lenders are already adjusting their prices. In a significant market signal, Commonwealth Bank (CBA) recently announced a substantial increase to its fixed-rate home loans.

Its three-year fixed rate jumped by a massive 0.70 percentage points, a move equivalent to three standard RBA hikes (of 0.25%). This placed CBA’s three-year fixed rate jump from 5.34% to 6.04%.

This wasn’t an isolated event. Dozens of lenders have increased their fixed rates in the last month. Why are they doing this?

Fixed rates are not directly tied to the RBA’s current cash rate. Instead, they reflect the banks’ predictions about the future cost of funding. When lenders raise fixed rates, it signals that they expect their own borrowing costs to go up. This is often interpreted as the banks “pricing in” future RBA rate hikes. They are essentially bracing for a higher-interest-rate environment and protecting their margins.

For borrowers, this has an immediate impact. Anyone who was considering locking in their interest rate may feel like they have missed the boat. The window for securing fixed rates below or around 5% is rapidly closing, with only a handful of smaller lenders still offering them. This shift effectively removes the certainty that many borrowers seek in an unstable economic climate.

The Inflation Challenge

A primary driver behind any potential rate hike is inflation. The RBA has a clear target: to keep inflation sustainably within the 2-3% range.

The monthly consumer price index (CPI) increased by 3.4% over the year to November, which is down from 3.8% in the year to September.

While recent data shows some easing, inflation remains above this target range, particularly in the services sector, think rents, insurance, and dining out.

RBA Data Test by YBR Marketing Team

Predictions from those in the know:

Almost half of leading economists are expecting the next move in interest rates to be a rate increase this year, according to the Australian Financial Review’s Quarterly Survey . ¹

Seven of the 38 economists polled expect a rate hike as early as next week, including those at CBA and NAB.

Bank	February 2026 Call	Expected Cash Rate Path
CBA	0.25% hike in Feb,	No change through 2026
Westpac	Hold	Likely extended period of rates on hold.
NAB	0.25% hike in Feb and another in May	Rates on hold for most of 2026
ANZ	Hold	Notes a risk of a rate hike early this year.

Predictions for interest rates as of Jan 12, 2026: Economists from Australia’s Four Major Banks. ²

17 of the 38 economists expect at least two further rate increases over the course of the next 18 months. The division amongst experts is not entirely unexpected, with RBA Governor Michele Bullock casting a clear warning following the December Board meeting where rates were left on hold.

“If inflation continues to be persistent and looks like it is not coming back down towards the target, then I think that does raise questions about how tight financial conditions are and the board might have to consider whether or not it’s appropriate to keep interest rates where they are or in fact at some point raise them,” said Ms Bullock.

Looking for Clarity?

Regardless of whether the RBA hikes or holds, the current environment has clear implications for borrowers.

For Variable-Rate Borrowers: You are directly exposed to any RBA cash rate changes. If the RBA hikes, your lender will almost certainly pass on the increase, leading to higher monthly repayments. It is crucial to review your budget and understand how much of a buffer you have to absorb potential increases.

For Fixed-Rate Borrowers: While you are protected from immediate changes, the recent lender-driven hikes mean that new fixed-rate offers are significantly less attractive. If your fixed term is ending this year, you will likely face a much higher rate when you refinance. It is vital to start exploring your options at least three to four months before your fixed term expires.

1. Review Your Budget: Stress-test your finances. Calculate what your repayments would be if interest rates went up by 0.50% or even 1.00%. Knowing your limits will help you plan ahead and avoid financial shock.
2. Build a Buffer: If possible, make extra repayments into your mortgage or build up savings in an offset account. This buffer can reduce your interest costs and provide a safety net if rates rise.
3. Compare Your Options: Do not assume your current lender is giving you the best deal. The mortgage market is highly competitive. A mortgage broker can compare dozens of lenders and products to find a more suitable rate, potentially saving you thousands.
4. Consider Refinancing: Even without an RBA move, lenders are constantly changing their pricing. If you haven’t reviewed your home loan in the last two years, you could be paying more than you need to. Refinancing to a lower rate can free up cash flow and help you manage future increases.

If you’re unsure how potential rate changes could affect you, speaking with an experienced mortgage broker can provide clarity and peace of mind. We’re here to answer your questions, discuss your options, and help you move forward with confidence.

^[1] https://www.afr.com/markets/debt-markets/rapid-repeated-interest-rate-rises-coming-this-year-economists-say-20251223-p5npp6

^[2] Source: https://www.canstar.com.au/home-loans/interest-rate-forecast-australia/; https://www.abc.net.au/news/2026-01-06/what-to-expect-from-rba-interest-rates-in-2026-hikes-on-table/106200132