Australian mortgage holders may be facing another tough year, with forecasts pointing to multiple interest rate hikes in 2026 after the Reserve Bank lifted rates again this week. Rising inflation is the key driver, and economists warn that further tightening could place more homeowners under financial pressure.
If you’re currently reviewing repayments or loan structure, it may be worth speaking with a broker about your home loan options sooner rather than later.
Key Takeaways
- Interest rates have risen again, with forecasts suggesting more hikes in 2026
- Inflation is rising, pushing the RBA away from the idea of rate relief
- Mortgage stress risks increase as repayments take up more household income
- Experts argue rates may still be “too low” despite recent cuts
- Borrowers may need to prepare for prolonged pressure rather than quick easing
Why Interest Rates Are Rising Again
The interest rate outlook has shifted sharply, with mortgage holders now being warned that the recent period of easing may not last.
After the Reserve Bank lifted interest rates by 25 basis points, economic forecasts are now predicting as many as four interest rate hikes in 2026, which could significantly increase mortgage repayments for households already dealing with cost of living pressures.
Inflation Is the Main Driver
The central issue behind the Reserve Bank’s shift is inflation.
Headline inflation has climbed again, with the rate rising to 3.8 per cent for the 12 months to December, pushing it further away from the RBA’s preferred band and increasing pressure for monetary tightening.
Economists Warn Interest Rates May Still Be Too Low
EQ Economics managing director Warren Hogan said the Reserve Bank never truly had inflation under control, even during recent rate cuts.
“The logical implication of all this is interest rates are not at the right level,” he said.
“No one wants to hear it, of course, and we don’t debate these things very well in our community, but the reality is interest rates are too low.”
Mr Hogan also suggested that acting sooner could reduce the long-term damage.
“We’ve got to get on with it and get those rates up a little bit,” he said.
“It’s their best chance of not having to raise rates a lot, you know, if they go early.”
Mortgage Stress Risks Are Rising
Multiple interest rate hikes could push more borrowers into mortgage stress.
This occurs when repayments begin consuming too much of a household’s income, leaving less room for essentials and increasing the risk of default, forced selling, or financial hardship.
If rates rise several more times in 2026, hundreds of thousands of mortgage holders could be placed “at risk” — particularly those who bought at peak prices, have high debt-to-income ratios, or are already operating with minimal savings buffers.
Borrowers with investment loans may also want to reassess strategy and cash flow, especially if they’re managing multiple properties under investment home loans.
What Homeowners Should Consider Next
With inflation rising and economists forecasting further rate hikes, homeowners may need to prepare for a longer period of higher repayments.
Even small increases in interest rates can have an outsized impact on borrowing costs, especially for households with large mortgages. This makes budgeting, reviewing loan structures, and keeping a financial buffer more important than ever.
For borrowers who want to improve repayment structure or explore refinancing pathways, commercial property refinancing and loan restructuring advice may also be relevant depending on the type of property being financed.
Learn More About Perry Finance
You can also learn more about the team and services at Perry Finance, or contact Perry Finance to discuss your situation.
