Measure up or down? How borrowers will win and lose in the RBA’s inflation debate

From mortgage squeezes to unexpected easing, Australia’s inflation battle means the next rate decision could reshape the household budget overnight.

With two weeks to go until the Reserve Bank’s first meeting of 2026, Aussie home owners are still considering different views on what the mortgage repayment path will look like this year.

The central banks’ recent moves to raise their lending rates have lenders expecting several increases from the RBA. If this plays out well, flexible borrowers could face paying hundreds more in monthly mortgage payments.

However, the jury is still out on whether borrowers will see their repayments rise in the coming months, with inflation earlier this month serving as welcome news for households, as headline inflation fell to 3.2% in the 12 months to November.

The adjusted mean is calculated by “trimming” away the most volatile items the Consumer Price Index considers, those with large price changes, to get a more realistic picture of the underlying trend of inflation.

Although this figure is still outside the bank’s target rate, it is acceptable for a monetary easing that appears to be delayed instead of next month’s rate hike, despite the country’s biggest lenders sending a different message.

As fixed rates start to rise, households are already looking at another squeeze on their finances before the RBA calls.

Constant values ​​increase

The Commonwealth Bank raised its three-year fixed rate to 0.70 per cent, a rate equivalent to more than two rate increases.

It comes after Macquarie Bank also raised rates by 0.25% on all fixed-rate loans.

The number of lenders offering fixed rates of less than 5% has fallen significantly over the past month even as consumers have been soaking up the holiday season and spending.

The Commonwealth Bank is raising its fixed rate targets. Image: Getty

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Rising default rates indicate that banks are preparing for higher funding costs.

The Australian Bureau of Statistics (ABS) expenditure index for November showed an increase of 1%, meaning average spending was 6.3% higher than last year.

If the RBA raises rates in two weeks in an effort to combat Christmas and New Year spending, there could be more for variable rate holders to pay as lenders pass this on to customers.

Given the original rate of 5.76%, Mortgage Choice has calculated the additional amount borrowers with various mortgage rates will have to pay starting next month:

Borrowers may be barred from rate hikes for now, especially because of the Reserve Bank’s warning as it struggles to interpret new data sets to monitor inflation.

The RBA now relies on a comprehensive, monthly data index from the ABS, which was launched with the aim of helping the bank make quicker decisions and forecast more accurately without having to wait for quarterly data.

Governor Michele Bullock said the bank will need time to adjust to the information, however, which could buy borrowers some time.

While Ms Bullock said a rate cut was off the table at the moment, further cooling in inflation as the year begins could result in a further monetary easing.

If rates were to be reduced, borrowers could have significant savings on their hands:

It comes as job growth slowed for the month, continuing its downward pattern from 2025.

Deloitte Access Economics partner Stephen Smith says the recent softening makes it unlikely that real wages will rise.

“The RBA will remain on hold in February,” he predicted. “Although the data that will be released later in January – especially the labor market and inflation figures for December – will be important pieces of the puzzle.”

Both the Commonwealth Bank and National Australia Bank have forecast a rate hike in February – a forecast that remains unchanged from the most recent inflation data.

Westpac and ANZ have not contributed to any change in the currency rate in the foreseeable future, while the Australian Stock Exchange indicates that markets are pricing in a 22% chance of an increase.

The RBA will make its next monetary policy decision on 3 February.

This article originally appeared on Mortgage Choice and has been republished with permission.