Reserve Bank tipped to raise rates

Table of Contents

• All eyes on the RBA as inflation nudges policy
• Why the RBA is weighing a rate rise
• How markets and experts are reading the signs
• What a 25 basis point rise means for mortgage holders
• Is the cash rate still the right tool in 2026?
• Practical steps households can take now
• Key takeaways

All eyes on the RBA as inflation nudges policy

The Reserve Bank tipped to raise rates is the headline on many desks today as economists and markets watch for a possible 25 basis point move. Higher-than-expected inflation data and solid job growth have put pressure on the RBA to act, while mortgage holders hope the bank might instead pause to give households some breathing space.

Why the RBA is weighing a rate rise

Inflation sits just above the RBA’s target band. While not runaway inflation, the trimmed averages the bank watches have nudged upward — enough to prompt commentary that a policy response may be necessary.

At the same time, employment remains strong. When wages and jobs are healthy, the RBA can be more confident that higher rates will bite into demand and slow price pressures.

How markets and experts are reading the signs

Major banks and market analysts are largely expecting a 25 basis point increase. That forecast contrasts sharply with commentary from a year ago, illustrating how quickly the economic backdrop can change.

That said, central banks sometimes surprise markets; a hold remains possible if policymakers judge recent price moves to be temporary or driven by one-off factors such as seasonal spending.

What a 25 basis point rise means for mortgage holders

Many Australians are already feeling stretched by high house-price-to-income ratios. If the cash rate rises by 25 basis points, mortgage repayments will climb.

For example, a $600,000 mortgage could cost roughly an extra $90 a month, while a $1,000,000 loan might rise by about $150 a month. These are illustrative figures and actual changes depend on your interest margin and loan product.

Is the cash rate still the right tool in 2026?

Only about 33 per cent of Australians hold mortgages, which raises a policy question: does changing the cash rate remain the fairest way to manage inflation? Rate moves cool spending, but they also redistribute income between borrowers and savers.

“Is this the way that we manage inflation moving forward? Is there a better and more fair way to do it?”

Higher interest rates benefit people with substantial savings or investments while adding pressure on households servicing debt. That distributional effect is central to the debate about future monetary tools and complementary fiscal measures.

Practical steps households can take now

• Review your mortgage: check whether refinancing or switching to a fixed rate makes sense.
• Update your budget: factor in potential repayment increases and prioritise essentials.
• Talk to your lender early if repayments look tight — many offer hardship options or tailored plans.
• Build a short-term buffer where possible to absorb rate shocks.

Key takeaways

• Markets largely expect a 25 basis point RBA rise after inflation surprised on the upside.
• A 25bp increase could add roughly $90/month on a $600k mortgage and $150/month on a $1m mortgage (approximate).
• Only around a third of Australians hold mortgages, prompting a wider debate on the fairness and effectiveness of rate policy.
• Households should review finances and speak to lenders if rates will strain budgets.

Will the Reserve Bank definitely raise rates today?

Market pricing points to a 25 basis point rise, but the RBA can decide to hold if it views the inflation move as temporary or affected by one-off factors. Keep an eye on the RBA statement and the governor’s commentary for the reasoning behind any decision.

How much will my mortgage repayments rise with a 25bp increase?

As a rough guide, a 25 basis point lift could add about $90 a month to repayments on a $600,000 mortgage and around $150 a month on a $1,000,000 mortgage. Exact changes depend on your loan rate, balance, and repayment schedule.

Why does the RBA use interest rates to manage inflation?

The cash rate affects borrowing costs, spending and saving across the economy. By raising rates, the RBA aims to cool demand and ease price pressures. However, this tool can have unequal effects across households, sparking debate about complementary fiscal and targeted measures.

The information in this article has been adapted from mainstream news sources and video reports published on official channels. Watch the full video here Reserve Bank tipped to raise rates amid inflation concerns | 7NEWS