Mortgage holders are bracing for fresh repayment pain after December inflation came in hotter than expected, fuelling bets the Reserve Bank will lift rates as early as next week, news.com.au reported.
Headline CPI jumped to 3.8% annually in December, with the trimmed mean at 3.3% – pushing inflation further above the RBA’s 2%–3% target band and raising the risk of more tightening. Markets had already priced in a 56% chance of a February rate hike before the figures landed, and the case to move has now strengthened ahead of next week’s board meeting.
Canstar data insights director Sally Tindall (pictured left) said the central bank will be focused on finishing the job on inflation after a longer‑than‑expected battle.
“It’s been four long years of high inflation and that will be weighing on the RBA,” Tindall said. “They know they need to get this done.”
She warned the latest numbers are a “kick in the guts” for stretched borrowers and tenants who had been hoping the next move would be down, not up.
“It’s a cruel twist for borrowers and renters, as they have to do most the heavy lifting,” Tindall said. “One rate hike won’t see a change for people who left their repayments the same after the last cut, but some people lowered their repayments because they needed the money. It may be very hard for them to start paying extra again.”
Housing costs remained a major driver of price growth, with housing inflation running at 5.5% in the year to December, up from 5.2% the previous month.
Tindall said the fresh spike in inflation makes near‑term rate cuts unlikely.
“We’d need inflation around 2.5% for a sustained period for the RBA to consider a cut again,” she said, adding that only a sharp increase in job losses or broader economic trouble would shift that outlook.
REA Group economist Anne Flaherty (pictured center) said December’s result “would suggest price pressures are proving stickier than hoped after only a modest easing in November.”
The hotter‑than‑expected inflation print comes on top of rising evidence that borrowers are scrambling to lock in their rates.
Money.com.au research of more than 1,000 Australians found 35% of borrowers plan to fix their home loan in 2026 to shield themselves from further RBA hikes, with many opting for two‑year or longer terms in a sign they expect rate pain to linger.
A further 9% intend to split their mortgage between fixed and variable, while 56% still prefer to stay variable and ride out the uncertainty – a sharp contrast with the “normal” level of fixed loans, which has been below 5% of new and refinanced mortgages over the past two years.
Equifax data underlines this shift, showing December 2025 mortgage enquiries at a three‑year high, with refinancing making up 36% of demand as borrowers aggressively hunt for better deals and protection from future hikes.
Money.com.au mortgage expert Alex Dore (pictured right) said “rate anxiety” is back as banks warn of potential hikes and inflation sits stubbornly above target, prompting more homeowners to choose certainty over chasing the very lowest rate.
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