Mortgage holders and property buyers across Australia are bracing for a potential interest rate rise, with the Reserve Bank of Australia (RBA) widely expected to lift the cash rate at its first meeting of 2026.
After holding steady at 3.6 per cent since August last year, all four major banks — CBA, ANZ, Westpac and NAB — are now forecasting a rate increase as early as next week. Several lenders have already moved ahead of the official decision, lifting fixed interest rates in anticipation.
The shift in expectations follows stubbornly high inflation figures released by the Australian Bureau of Statistics, combined with low unemployment and strong household spending — a mix that has left economists confident the RBA will act to prevent inflation from resurging.
Inflation Pressures Put the RBA Back in Focus
Australia’s Consumer Price Index (CPI) rose to 3.8 per cent in the year to December, drifting further away from the RBA’s target range of 2 to 3 per cent.
More telling for policymakers is the trimmed mean inflation figure, which removes volatile price movements to better reflect underlying inflation pressures. This measure came in at 0.9 per cent quarter-on-quarter and 3.4 per cent year-on-year.
According to NAB senior economist Taylor Nugent, the latest data confirms that “underlying inflation was stronger than the RBA was forecasting back in November.”
As a result, NAB is now predicting rate hikes in both February and May, potentially taking the cash rate to 4.1 per cent. Capital Economics shares this view, with economist Abhijit Surya stating that keeping rates on hold for the foreseeable future now seems “virtually out of the question.”
CBA head economist Belinda Allen also expects a 25-basis-point increase in February, though she believes a single hike may be enough to fine-tune the economy.
RBA Governor Michelle Bullock previously warned that further rate rises in 2026 were possible if inflation remained persistently high — and the latest figures appear to support that outlook.
Employment Strength Adds to the Case for Higher Rates
Beyond inflation, the RBA will also be weighing up labour market data.
Unemployment currently sits at 4.1 per cent, with December employment increasing by 65,200 and workforce participation at 66.7 per cent. According to LJ Hooker Head of Research Mathew Tiller, this combination of strong jobs growth and elevated inflation may “force the RBA’s hand.”
What Does This Mean for the Property Market?
While rising interest rates typically dampen buyer activity, experts suggest any impact is likely to be measured rather than dramatic.
Tiller explains that even speculation around rate rises has a flow-on effect across the market.
“Buyers begin to re-run budgets, decision time slows and some borrowers try to lock finance earlier than planned,” he said. “Activity doesn’t stop — it just moderates and becomes more price sensitive.”
Rather than triggering a downturn, a rate hike is expected to cool momentum.
Recent ABS data shows new investor loan commitments rose 13.6 per cent in the September quarter, highlighting continued investor confidence. Tight rental conditions are also keeping investors engaged, despite higher borrowing costs.
With population growth still elevated, new housing supply lagging, and listings remaining tight in many areas, there appears to be a natural floor under property prices — even if days on market begin to stretch.
Looking Ahead
As the February RBA meeting approaches, uncertainty is prompting both buyers and sellers to reassess their strategies. While higher rates may slow activity, Australia’s underlying housing fundamentals remain resilient.
For property owners, investors and homebuyers alike, understanding how interest rate movements flow through to borrowing capacity, pricing and demand is key to making informed decisions in 2026.
At RNJ Realty, we continue to monitor market conditions closely to help our clients navigate changing economic settings with confidence. If you’d like tailored advice on how potential rate changes could affect your property goals, our team is here to help.
