It’s February 2026: Rate Hikes Are Coming
Don't shoot the messenger, but it looks like we're now in for some interest rate rises. And more than just one too.
Really sorry to say it folks, but we're back in that place where interest rates are going to be rising now. But it shouldn’t be for too long this time.
Back in November we said we were likely in for a period of flat interest rates - no cuts or hikes; however inflation is moving faster than anyone anticipated. (Remember, inflation is the level that prices grow, of the things that we all typically buy & use each week.)
And because it is moving so fast now, the Reserve Bank (the RBA) is going to need to move to rate hiking mode for a little bit.
So why is this?
Well, the growth in prices of everything we spend our money on (aka inflation) has now climbed back to 3.8%, which is roundabout where it was 4 years ago in December 2021. Back then, it then went on a march for 12 months up to 7.9%, which was that all-time painful high back in December 2022, before it eventually started dropping.
And back then, it took the RBA 6 months to have that 1st-of-13 interest rate rises (in May 2022) and by then inflation was already past 5%. Of course, it’s been well publicised that the RBA took a little too long to get started, coming out of the Covid lockdowns.
All those rate rises hurt and I don’t think the RBA wants to repeat that dose of lots of hikes this time around. The RBA has probably learnt those lessons of last time of waiting too long; so nipping it in the bud now before we get that pain of rampant inflation, is really important.
Our prediction
I believe we'll probably get 2 to 4 rate hikes this year; and they might even be in quick succession. At their next 3 meetings (in February, March & May), they might decide to increase 0.25%, 0.25% & 0.25%; and then just stop and see what happens. Which is actually okay.
A quick reaction from the RBA this time, might hopefully avoid the long & painful time it took them to get inflation under control last time. And in doing so, it should get inflation back to the bottom of their 2-3% band they like it to sit in; and hopefully it stays there for quite a while.
What can you do about it?
Well, if you took advantage of our guidance in November to fix some rates, you're in a decent spot - you were able to get interest rate cuts that never actually happened. Well played to you!
But if you’ve been sitting and watching, that's okay too - however you may want to stop sitting on your hands though.
At the moment (as at today), most lenders have only 1 rate hike factored into their current fixed rates (so they are ~0.25% higher than their variable rates), which means there is some space to lock it now and avoid getting those extra potential rate rises.
If you want to do that, you can send us an email or book a chat to talk about your specific loan and lender.
However if you can’t or just don’t want to fix, you can prepare for it right now: our tip is to set aside the extra cash that 3 interest rate increases would have on your home loan. Literally, take that cash out of your spending account and set it aside each pay cycle into your offset account. And don’t touch it.
You might also want to just review your family budget. It's the perfect time of the year to do it and it might just help you find some of those savings that 0.75% in rate hikes might take off you.
Just remember, this isn’t an attack by the RBA on home owners with mortgages (despite what the media says) - this is an intentional attack on the whole economy. Because history tells us that low and stable inflation (creeping along between 2-3%) is essential for a strong economy, minimal unemployment and all our wages going up.
So even if we don’t get rate hikes at the next RBA meeting this month, we are going to get them if the inflation trend remains.
Article by: Justin Dickinson
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The information provided here is General in nature and is not financial or tax advice. It has been prepared without considering your individual personal situation. Therefore, before acting on this information, we recommend that you consider carefully if it is appropriate for you; however if you’d like to know how it suits your individual situation, book a chat, contact us or send us a message.
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