Stubborn underlying inflation will keep pressure on the RBA to consider another cash rate hike this year, despite a drop in annual headline inflation in July.
ABS figures today show headline CPI came in at 3.5% in the year to July, down from 3.8% the month prior.
Yet trimmed mean, the RBA’s preferred measure for inflation, stayed put at an annual rate of 3.6% for the second consecutive month.
The last time core inflation went down was November 2025 – 8 datasets ago.
RBA keeping rate hike lever warm
The RBA reiterated in its August Board meeting minutes, released yesterday, it will continue to do what is necessary to deliver price stability, including hiking the cash rate further should upside risks materialise.
The minutes noted: “Several members judged that it was quite possible that the upside risks to the inflation forecast would crystallise, requiring some further tightening.”
RBA’s inflation forecast: Aug 2026 | |||||
|---|---|---|---|---|---|
Dec 26 | Jun 27 | Dec 27 | Jun 28 | Dec 28 | |
CPI | 3.6 | 2.8 | 2.6 | 2.4 | 2.4 |
Trimmed mean | 3.3 | 3.0 | 2.6 | 2.4 | 2.4 |
Source: RBA.
If the RBA is forced to pull the lever on another rate hike, Canstar's analysis shows a 0.25 increase would add another $92 per month to a $600,000 loan with 25 years remaining, tallying $364 more per month across what would be four rate hikes.
Impact of further 0.25 hike on monthly repayments | ||
|---|---|---|
Loan size at start of hikes | Hike in Sept | Cumulative increase across 4 hikes |
$600,000 | +$92 | +$364 |
$800,000 | +$122 | +$485 |
$1 million | +$152 | +$606 |
Source: Canstar. Notes: Based on an owner-occupier paying principal and interest with 25 years remaining in Feb 2026 at the RBA avg variable rate. Assumes next rate hike falls in September and banks pass it on the month after. Changes are to minimum repayments.
Mortgage wars the key to finding relief ahead of a hike
The mortgage wars between lenders continue to escalate despite no move to the cash rate since May 2026.
Rate tracking by Canstar shows 35 lenders have cut new customer variable rates since 1 June.
As a result, 52 lenders are now offering at least one variable rate under the 6% mark, up from the 38 recorded at the start of June, with just one big bank in this list: Westpac.
The lowest variable rates start from 5.69% for loans that have a 40% deposit, or from 5.79% for those with as little as a 5% deposit.
Lowest variable rates for refinancing | ||
|---|---|---|
Lender | Rate from | Min deposit |
Pacific Mortgage Group | 5.69% | 40% |
LCU | 5.79% | 5% |
The Mutual Bank | 5.79% | 20% |
Unity Bank | 5.80% | 5% |
P&N Bank | 5.83% | 20% |
Source: Canstar. Based on owner occupier loans, excludes construction, first home buyer only and green loans. Other eligibility conditions may apply.
Majors losing ground to non-bank lenders
ABS lending indicator data shows the major banks, while still very much the dominant force in the mortgage market, have lost a small amount of ground to non-bank lenders.
The June 2026 data shows the big banks accounted for 69.6% of all new loans committed in the quarter, excluding refinanced loans, down from 72.7% the year prior (June 2025 quarter).
Non-bank lenders, on the other hand, have picked up the difference, accounting for 10.7% of all new loans committed in the most recent quarter, up from 6.9% a year ago.
Majors vs other banks vs non-banks: | |||
|---|---|---|---|
Jun 25 qtr | Jun 26 qtr | Change %-pts | |
Majors | 72.7% | 69.6% | -3.1 |
Other banks | 20.4% | 19.7% | -0.6 |
Non-banks | 6.9% | 10.7% | +3.8 |
Source: ABS lending indicators, June quarter data, released 14 Aug 26, seasonally adjusted data, excludes refinanced loans. Prepared by Canstar.
Savers continue to gain from higher rates
Stubborn inflation sees savers benefit from a prolonged period of higher rates, with competition between the banks ramping up in this sector as well.
Yesterday, BOQ hiked its highest ongoing savings rate to a new market-leading figure of 5.80%.
The new rate further ignites competition for young adults, as the BOQ rate is reserved for customers aged 14-35 years and pulls ahead of Westpac’s 5.75% rate for customers aged 18-40.
Highest ongoing savings | ||||
|---|---|---|---|---|
Bank | Max | Max | Monthly | Rate if |
BOQ | 5.80% | $50k | Deposit $1k+ and make 5+ purchases in linked bank acct | 0.05% |
Westpac ages 18-40 | 5.75% | $150k | Make 20+ purchases on linked bank acct + grow savings bal | 0.10% |
MOVE Bank | 5.65% | $25k | Deposit $200+ into savings and no withdrawals | 0.10% |
ING | 5.50% | $100k | Deposit $1k+ and make 5+ purchases in linked bank acct, plus grow savings balance. | 0.01% |
Source: Canstar. Note: Deposit amounts and other conditions apply.
Borrowers can't afford to sit back and wait
Canstar’s Data Insights Director, Sally Tindall, says, “While today’s headline inflation figure looks like good news on the surface, the RBA won't be fooled by the drop recorded in July.”
“Core inflation, which is sitting stubbornly at 3.6 per cent, tells the real story – price pressures haven't gone away and the Board has made it clear it won't hesitate to pull the trigger on another hike if the risks keep mounting.
“While today’s figures do not mean a hike in September is a given, borrowers should prepare their mortgage for one regardless by shopping around for a more competitive home loan rate.
“Another 0.25 hike before Christmas would add $92 a month to an average $600,000 mortgage, pushing cumulative increases across four hikes to around $364 a month.
“Borrowers simply can't afford to sit back and wait to see what the RBA does next.
“The good news is that the mortgage wars between lenders continue to gather pace, with Canstar data showing a total of 35 lenders have cut new customer variable rates since 1 June. This takes the total number of lenders offering at least one variable rate under 6 per cent to 52.
“The key to unlocking these sharper rates is to turn yourself from an existing customer into a new one, something Australians are doing in droves.
“The latest ABS lending indicator data shows $67 billion worth of mortgages refinanced in the three months to June 2026 – the third highest level on record. The question for borrowers looking for relief from higher rates is, is your mortgage represented in this total?
"Savers continue to reap the rewards of a prolonged high-rate environment. BOQ has pushed the highest ongoing savings rate up to 5.80 per cent, however, like most competitive savings rates, it comes with caveats – the primary one being you have to be aged 14 to 35 to qualify."
