Rising inflation signals end to interest rate relief this year, brokerage warns
A growing cohort of mortgage holders is shifting towards fixed rate mortgages as the prospect of interest rate cuts recedes.
Market commentators attribute the movement to sustained inflationary pressures, which continue to constrain the Reserve Bank of Australia's ability to ease monetary policy.
Evolve Lending and Finance, a mortgage brokerage based in Sydney and previously operated under the Bell Partners Finance banner, has documented an uptick in client inquiries regarding the shift to fixed rates.
The group's observations reflect broader market trends as borrowers reassess their exposure to variable rate risk.
"Something we have been seeing lately is clients switching to a one-year fixed option," said Mark Stevenson (pictured right), managing director at Evolve Lending and Finance. "In most cases, they are saving around 0.25% on their current variable rate and also avoiding the usual costs such as discharge and application fees from changing lenders."
However, the fixed rate market itself is undergoing significant contraction too. Data compiled by Canstar reveals that the competitive landscape for lower-rate products has narrowed considerably. The number of lenders offering fixed rates beneath 5% has diminished to 36 from 46 in the previous month.
Lender pricing trends since the start of November demonstrate an asymmetry between upward and downward price movements: 18 lenders have increased at least one fixed home loan rate, while only nine have implemented reductions during the same timeframe.
The official cash rate stands at 3.6%, unchanged since the RBA's August reduction of 25 basis points –the third decrease implemented during the year. Market participants now expect the central bank to maintain the cash rate when it convenes for its final monetary policy meeting on 9 December.
Inflationary developments constitute the primary factor supporting the RBA's cautious posture. Annual headline inflation has risen to 3.8%, while the trimmed mean measure – calculated by excluding volatile price components – has climbed to 3.3%, exceeding the RBA's 2-3% target.
The deteriorating inflation backdrop has prompted fresh concerns about the timeline for relief.
"There's no prospect of more rate cuts this year, and economists don't expect any relief in the first half of 2026," Stevenson said. "We may not see any further rate relief until 2027, and next year there could even be rate rises, so there are challenging times ahead for mortgage holders."
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