Interest rate forecast and predictions for 2026

What is happening with the cash rate?

After several years of steep hikes, and a year without movement in 2024, the central bank finally began lowering rates at the beginning of 2025, and cut the cash rate a total of three times throughout the year.

With inflation on the rise, though, the RBA held the cash rate steady at 3.60% at its December meeting, and and the cycle of cuts appears to be well and truly over.

There remains a question, though, as to whether we’ll see rates rising again in 2025, and while the most recent CPI numbers might satisfy the RBA’s board enough to hold rates steady for now, nothing is certain.

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Will Australians see rate cuts in 2026?

With rate cuts unlikely in the near future, the question now becomes when and by how much rates might rise again.

Throughout the latter half of 2025, inflation began creeping up again, with headline inflation hitting 3.8% in October. The most recent figures, however, show it dropping back to 3.4% in November.

While this is still above the RBA’s target band of 2-3% for inflation, this cooling means that the bank’s board may not decide to pull the trigger on a rate hike when they meet again in February.

Canstar’s data insights director Sally Tindall cautions that when it comes to a possible rate hike. we’re not in the clear just yet.

“Inflation is now moving back in the right direction.” says Tindall. “That’s a small win for the RBA but the reality is trimmed mean inflation has been at or above 3 per cent for five consecutive months. What this tells us is that the current cash rate setting might not be high enough to bring inflation back down to its target of 2.5 per cent.”

“Much will be riding on the next round of quarterly inflation figures due out six days before the RBA’s next cash rate call.”

What are the big four banks’ cash rate predictions?

Here’s what the major banks currently have to say about the RBA’s predicted movements into 2026:

• ANZ currently predicts that the cash rate will remain steady.
• CBA currently predicts a rise of 25 basis points in February.
• NAB currently predicts a rise of 25 basis points in February and another in May.
• Westpac currently predicts that the cash rate will remain steady.

Where the RBA board formerly met on the first Tuesday of each month, excluding January, it now meets eight times a year, for two days at a time. This means that the RBA’s next cash rate announcement is due on Tuesday February 3 at 2.30pm.

Will interest rates rise again in 2026?

One of the RBA’s key mandates is to keep inflation in line in the economy, and with headline inflation now sitting at 3.4%, above the central bank’s preferred range, a cash rate rise is not out of the question.

Citi was the first major bank in Australia to forecast a hike in 2026, and economists there are currently tipping two raises next year, one in February and one in March.

CommBank and NAB had both predicted that the central bank would hold rates steady in the first half of 2026, but both have recently revised this forecast. Both predict a hike in February, and NAB is also calling one for May.

If the RBA decides to lift the cash rate as soon as February and banks pass on the increase in full, many variable rate borrowers would see higher repayments flow through in the weeks that follow.

Canstar research found that, for an owner-occupier with a $600,000 debt and 25 years remaining, a 0.25 percentage point hike would increase the minimum monthly repayment by $90.

How can I compare home loans?

If you’re looking for a low fixed or variable rate for a new home loan or a refinance, you can compare home loans with Canstar to see if you can find a lender offering a deal that meets your needs and circumstances.

If you’re considering refinancing from a variable rate to a fixed one, it may also be worth considering the pros and cons of fixing your home loan, and considering the current interest rates on home loans to see how fixed and variable rate loans stack up. You might also want to consider some of the home loan refinancing deals that might be available.

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