Homeowners face higher repayments after the Reserve Bank hikes cash rates again – realestate.com.au

The Reserve Bank has raised the cash rate by 0.25 percentage points, citing reaccelerating inflation and an economy still strong enough to support price pressures.

For many households, this means that monthly repayments will increase by more than €100.

PropTrack models, which assume typical mortgage rates rise from 5.5 per cent to 5.75 per cent in February, show Sydney borrowers will take the biggest hit, with average repayments of $156.20, from $5,618.84 to $5,775.04.

The typical monthly increase is estimated at $129.18 in Brisbane, $121.47 in Perth, $115.66 in Adelaide, $109.86 in Canberra, $107.20 in Melbourne, $88.89 in Hobart and $73.24 in Darwin.

“As widely expected, the RBA raised the cash rate by 25 basis points at its first meeting of 2026,” said Angus Moore, senior economist at REA Group.

“This is in response to higher than expected inflation in the December quarter, and unemployment falling to 4.1 percent.”

Mr Moore said the course of the share price would determine what happens next.

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“How inflation develops in early 2026 will determine how rates move today. At this point, another surge is expected by mid-to-late 2026, but whether that happens will be determined by how persistent inflation is.”

He added that while home prices are still expected to rise this year due to last year’s budget cuts and solid economic and housing fundamentals, higher interest rates are likely to slow the pace.

Ray White chief economist Nerida Conisbee said inflation picked up again in December, with a CPI of 3.8 percent and a reduced average of 3.3 percent.

“Both measures now move further away from the RBA’s target range of 2 to 3 percent, weakening confidence that inflation will return to target without additional restraint,” she said.

She said the labor market still gives the central bank room to act.

“Unemployment remains low at 4.1 per cent and employment is still growing, supporting household incomes and spending. With demand continuing and inflationary pressures spreading across both goods and services, the RBA believes policy should become more restrictive.”

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However, housing remains a tricky decision.

“Rents, electricity prices and the cost of new homes continue to rise, driven by a shortage of housing rather than excess demand,” Ms Conisbee said. “

Higher interest rates will not solve these structural problems. By lifting financing costs for developers and investors, higher rates are likely to further restrict new supply and put additional upward pressure on rents.”

Despite this, she said, the RBA had chosen to prioritize broader inflation control.

“With inflation accelerating again and the economy still proving strong, the Bank has assessed that the risk of inflation becoming entrenched now outweighs the risk of further tightening, even if this exacerbates housing cost pressures.”

The Australian housing market has proven resilient despite higher financing costs.

Prices rose by about 12 percent through 2025, supported by robust population growth and very limited new supply.

“The decision signals a central bank’s growing concern that inflation is not yet under control and its willingness to accept greater pressure on the housing market to ensure inflation is brought back towards target,” Conisbee said.

Refinancing is also likely to increase.

Ray White Chief Economist Nerida Conisbee

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Equifax Executive Managing Director Moses Samaha said today’s increase could lead to a short refinancing burst, which would reflect the start of the 2022 tightening cycle.

“In 2022, the response to the first rate hike was immediate. As soon as rates rose in May 2022, refinancing volumes increased by 25 percent compared to the previous month,” he said.

An analysis from Equifax shows that refinancing applications were already on the rise, up 9.6 percent in the December quarter of 2025 compared to a year earlier.

By age, homeowners 46 and older led refinancing growth for the first time since 2023, with year-over-year inquiries increasing 12 percent in the quarter, followed by 35- to 46-year-olds at 11.1 percent.

By state, Queensland led with a 14.5 per cent annual increase in refinancing applications in the quarter, followed by New South Wales with 10.6 per cent.

“We see refinancing demand being driven by older demographics as mortgages extend further into later life,” Mr Samaha said.

“As Australians take longer to enter the market and mortgage sizes increase, mortgage debt cannot be seen as just the burden of a young family. Generation

For borrowers, the message is clear: brace yourself for higher repayments now and pay attention to the inflation figures from early 2026 – they will set the tone for where interest rates will follow next.