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RBA ‘grinches’ Christmas: No more rate cuts this year
At its final meeting of the year, the Reserve Bank of Australia (RBA) has held the cash rate steady, keeping borrowing costs elevated and maintaining a cautious environment for investors heading into 2026.
While 2025 saw the RBA pass on three rate cuts, Australians won’t see any further mortgage relief for the year, as the central bank decided to hold the cash rate at 3.60 per cent.
Since the last rate cut in August, the RBA has been cautious in its decision to hold, as inflation has continued to erode buyer confidence and drive auction clearance rates to yearly lows.
Latest data showed that the headline inflation was at 3,8 per cent, with the trimmed mean at 3.3 per cent, both higher than the banks’ 2-3 per cent target.
CreditorWatch chief economist, Ivan Colhoun, said the outcome was widely anticipated, with market conditions that could prompt an earlier return to tighter policy amid hotter-than-expected inflation.
“Key here will be the extent to which inflation is judged to be persistently running at a rate inconsistent with a return to 2.5 per cent inflation, along with assessments of momentum and spare capacity in the economy,” Colhoun said.
“A Q4 trimmed mean inflation print above 0.8 per cent q/q would significantly increase the risk of an interest rate rise early next year.”
Similarly, Domain’s chief of research and economics, Dr Nicola Powell, said the hold was already “baked in”.
“The RBA is still battling persistent inflation, and with rents, energy and insurance costs remaining high, plus stronger-than-expected household spending, there’s simply no room for a fourth cut this year,” Powell said.
“What’s more interesting is how expectations have shifted. Financial markets see the next move as an increase, rather than a decrease, with a 25 basis-point hike largely priced in before the end of 2026.”
Powell said that for the housing market, the rate hold will provide stability for both sellers and vendors as prices won’t rise as rapidly.
Yet she said borrowers will still feel the bite of their mortgage repayments, as interest rates remain higher than in the pre-tightening cycle in 2022.
Mortgage cost: #1 worry of Australians
According to the Canstar Consumer Pulse Report, mortgage costs remained Australians’ number one concern for 2026, with 21 per cent saying keeping a roof overhead was their biggest financial concern.
Data showed that rising interest rates have strained Australian finances, with housing costs, mortgages, and rents now more than double what they were five years ago.
While 66 per cent of owner-occupiers still feel they will be able to manage rates in 2026, over 50 per cent of renters saw rents rise in 2025 by an average of $62 per week, driving 42 per cent to cut spending and 17 per cent to move for more affordable housing.
The report showed that Australians’ income expectations for 2026 remain muted, with just 17 per cent confident of a pay rise and 49 per cent expecting none.
Fixing mortgages could be the solution
As mortgages continue to be a source of stress for borrowers, experts remain divided on whether rates will rise again in 2026, with some suggesting that fixed rates could ease financial hardship.
Finder analysis showed that a home owner with a $600,000 mortgage at an average 5.52 per cent rate could save $4,079 next year by switching to the lowest fixed rate of 4.48 per cent, assuming the cash rate remains unchanged.
Finder's head of consumer research, Graham Cooke, said that fixing could be a solution depending on the borrower's risk appetite.
“If you are really struggling and need the certainty of set repayments to manage your budget, fixed rates can provide that emotional security and certainty.”
While fixing could reduce stress for certain borrowers, Cooke said that attempting to outsmart the bank by locking in a fixed rate has usually been risky.
“If variable rates do drop, you could be stuck paying a higher fixed rate or face a penalty of thousands of dollars to get out,” he concluded.
