What the Latest Rate Decision Means for Borrowers

On 9 December 2025, the Reserve Bank of Australia (RBA) delivered its final cash rate decision of the year, choosing to hold the official cash rate at 3.60 per cent. This outcome was widely anticipated by economists and financial markets alike, but the message from the central bank contains hints that the era of cuts may be over and that rate rises could be on the horizon in 2026.

Why the RBA Held Rates Steady

The board left the cash rate unchanged, citing recent inflation data and saying that while some of the recent rise in inflation may be due to temporary factors, the overall inflation picture remains above where the RBA wants it to be. Governor Michele Bullock pointed out that the board was not comfortable with inflation at current levels, and that the possibility of rate rises was still very much on the table.

The RBA’s next official cash rate announcement is scheduled for early February 2026, and this meeting is already attracting significant market attention.

What Economists and Markets Are Saying

Although rates stayed steady in December, economists and markets are increasingly pricing in the possibility of a rate rise early in the new year:

• Major banks including Commonwealth Bank (CBA) and National Australia Bank (NAB) have publicly forecast that the RBA could begin lifting the cash rate as soon as February 2026. CBA has suggested a modest increase of around 25 basis points, while NAB has indicated the potential for multiple increases in the first half of the year.
• Market indicators that track expectations around the official cash rate have reflected growing anticipation of changes in 2026. These tools show how futures markets are pricing the likelihood of a rate adjustment at upcoming RBA meetings.
• The reason for this shift in expectations is simple: inflation remains above the RBA’s preferred target range, meaning the bank may feel compelled to act if price pressures do not ease.

Why This Matters for Homeowners and Borrowers

For homeowners, investors and anyone with a mortgage, the possibility of rising interest rates has real implications:

1. Variable Rates Could Climb
If the RBA begins lifting the cash rate, many lenders will pass on those costs through higher variable rates. That means repayments on ongoing loans could increase, making budgeting more challenging.

2. Fixed Rates May Become More Attractive
In anticipation of rate rises, many lenders have already started lifting fixed home loan rates. Recent pricing movements show that some popular fixed products are becoming more expensive as lenders build in expected rate increases.

3. The Time to Review Your Loan Is Now
Whether you’re a current borrower thinking about refinancing or a prospective buyer planning to secure finance in 2026, now could be a good moment to explore your options. Fixing part or all of your loan before rates rise might offer greater certainty and protection against future increases.

What Should You Do Next?

The RBA’s rate hold in December offers a temporary period of stability, but with the outlook shifting toward potential rate rises, it is worth having a conversation about your loan strategy. This might include comparing fixed versus variable rates, understanding your repayment buffers, and planning for different rate scenarios.

If you would like help interpreting what the latest RBA signals mean for your situation, feel free to reach out. We can look at your current loan setup and talk through strategies that make sense for your goals.

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