Updated forecasts from Australian major banks point to higher rates next week and potential further tightening ahead
Westpac and ANZ have revised their cash rate forecasts to a rate hike in February following stronger-than-expected inflation figures, bringing them into line with Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB).
All four major banks now anticipate a 25-basis-point increase at the RBA’s first meeting of 2026 next Tuesday, while NAB remains the only major forecasting a further hike in May.
The Australian Bureau of Statistics’ latest consumer price index release showed headline annual inflation in the monthly series rising to 3.8%, with trimmed mean inflation at 3.3%. In the quarterly series – still the RBA’s preferred gauge – trimmed mean inflation lifted from 3% to 3.4% in the December quarter, above the central bank’s earlier projection of 3.2% for that period.
For mortgage portfolios, a move next week that takes the cash rate to 3.85% would add about $90 a month to repayments on a $600,000 owner-occupier loan with 25 years remaining, assuming lenders pass on the full increase to variable-rate borrowers.
Bank data indicate that many customers have built repayment buffers during the previous tightening phase. NAB figures show that 80% of its variable-rate borrowers kept their repayments unchanged after each of the three rate hikes in 2025, effectively paying extra into their loans. CBA has reported that most of its variable customers also maintained repayments after prior increases, leaving a substantial cohort ahead on their schedules.
“With inflation running hotter than expected, the RBA has little choice but to make a U-turn back to rate hikes,” said Sally Tindall (pictured right), data insights director at Canstar.com.au.
“We’re now four long years into the battle with inflation and today’s results confirm we’re once again headed in the wrong direction. The RBA no longer has the luxury of continuing its ‘wait-and-see’ strategy if it's serious about getting the inflation job done.”
“This cruel twist back to hikes is a stark reminder that borrowers and renters are often asked to do much of the heavy lifting when it comes to reining in inflation.
“Canstar data shows there are currently over 40 lenders offering at least one variable rate under 5.25%. However, one hike could see the goal posts shift this to the mid-5’s.”
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