No Christmas Interest Rate Cuts, So Could Rates Rise in 2026?

Not long ago, plenty of economists were pencilling in another run of rate cuts in 2026. Now the story has changed. There is even growing chatter about the risk of rate hikes next year.

That is the fun part about interest rates. They can flip the script quickly.

We started 2025 with the Reserve Bank of Australia (RBA) cash rate at 4.35%. February delivered the first cut in five years. After two more rate cuts, the cash rate is now 3.60%.

Because the RBA kept rates on hold in December, the cash rate stays at 3.60% for now. The next decision is due in February, when the Reserve makes its next rate call.

Only a couple of months ago, in October, several big banks were still forecasting lower rates in 2026. Today, the odds of an early 2026 cut, or any cut over the next 12 months, are looking a lot slimmer.

Why Rate Cuts Are Getting Harder to Justify?

Three factors are keeping the cash rate stuck in a holding pattern.

First, the Australian economy is growing. Growth has only been 2.1% for the year, but the direction is still upward.

Second, the jobs market is holding up. Unemployment fell to 4.3% in October, down from 4.5% in September.

Third, and most importantly, living costs are still rising. Inflation is currently 3.8%, which is well above the RBA’s 2% to 3% target range.

After the December meeting, RBA Governor Michele Bullock told journalists that “additional (rate) cuts are not needed”. She also flagged that future rate hikes are not off the table.

Put simply, official interest rate cuts look unlikely in the near term.

What an RBA Interest Rate Cut Would Need to Look Like

For an RBA interest rate cut to come back onto the agenda, inflation needs to cool further and stay inside the 2% to 3% band. The RBA also needs to feel confident that wage pressures and broader cost increases are not about to re-accelerate.

Until then, the Reserve has a reason to be cautious. Strong employment and gradual growth can keep demand firm, and that makes inflation harder to squeeze down quickly.

Interest rate cuts could still happen, but they are no longer the most likely outcome for 2026.

What to do Now While Interest Rates Stay Unpredictable

Even if the RBA interest rate cuts hold steady, you are not stuck sitting on the same deal. The home loan market is competitive, and some lenders have recently trimmed their variable rates.

That means there may be room for you to negotiate a better outcome, especially if you have had the same loan for a while. Refinancing to a sharper rate could put money back in your pocket through 2026 and beyond. It can also help you switch into features that suit how you actually live, like an offset account, redraw flexibility, or a different fixed and variable split.

Get a Home Loan Review with Osinski Finance

If you want to see whether you can line up your own “rate cut”, speak with Osinski Finance. Even if an RBA interest rate cut does not arrive soon, we help Australians with home loans, refinancing, and investing in a property with clear options and lending structures that suit your goals, not just the bank’s.

Contact us for a home loan review today.

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