Mortgage holders brace for Christmas pain as high inflation fuels interest rate hike fears – realestate.com.au

ANALYSIS

Mortgage holders are facing a gloomy Christmas after inflation rates rose again in November.

The consumer price index (CPI) rose 3.8 percent in the 12 months to October 2025, compared to 3.6 percent in the 12 months to September 2025, according to the latest release from the Australian Bureau of Statistics (ABS).

The biggest contributors to annual inflation came from housing (+5.9 percent), food and non-alcoholic beverages (+3.2 percent), and recreation and culture (+3.2 percent).

The phasing out of electricity rebates, as noted earlier this week by federal Treasurer Jim Chalmers, also played a role in the high number, as did recent spikes in fuel costs and rising prices for services, including in construction and real estate.

The trimmed average inflation was 3.3 percent in the twelve months to October 2025, compared to 3.2 percent in the twelve months to September 2025.

The figures have dashed hopes of a rate cut in December, and given that Australians are expected to spend almost $7 billion in one weekend when Black Friday and Cyber ​​Monday sales kick off in a few days, it’s hard to see anything that could convince the RBA to change its cut and slash rates.

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In fact, the arguments for an interest rate increase are becoming stronger by the month.

The recent ANZ-Roy Morgan Inflation Expectations survey came in at 5.4 per cent for the week to November 23, the highest level since December 2023.

Roy Morgan CEO Michele Levine was not surprised by the figures, noting that inflationary pressures caused by energy prices were “clearly a factor.”

“Average gasoline prices are on track to reach an eight-month high above $1.80 per liter in November,” she said.

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Treasurer Jim Chalmers warned of a rise in inflation in November. Photo: Nikki Kort

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“The rise in inflation expectations and average petrol prices has been accompanied by a sustained increase in official ABS inflation, from a low of 1.9 percent in June 2025 to 2.8 percent in July 2025, 3.0 percent in August 2025 and 3.5 percent in September 2025 – the highest since July 2024 (3.5 percent).

Inflation is starting to head in the wrong direction, is still persistent and Australians continue to spend freely.

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And with November being the first month in which the RBA begins to focus on monthly inflation figures, rather than quarterly figures, there is a chance that the central bank will make a hike in December, thanks to a series of new capabilities that will allow the data to take into account almost twice as many measurable factors as before.

The peak Christmas and festive season, which comes immediately after the Black Friday sales, could be a reason for a pre-emptive increase to temper spending and prevent the RBA from being confronted with even more worrying figures when it meets again in February 2026.

At its meeting in November, the RBA decided to leave interest rates unchanged after three rate cuts this year. Governor Michele Bullock warned that inflation was “materially higher than expected” after CPI figures for the September quarter came in at 3.2 percent.

Moderate average inflation, the RBA’s preferred measure, had returned to 3 percent and was expected to remain at that level until mid-2026.

“Just under 3 per cent is not good enough for governance,” Ms Bullock said, reaffirming 2.5 per cent as the preferred target for the future.

RBA Governor Michele Bullock after November’s decision to hold rates steady. Photo: Nikki Kort

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“We’ve already had three rate cuts. I know mortgage holders always want more, but it’s also important that we keep inflation under control because that’s ultimately what affects people’s living standards.”

Ms Bullock said keeping cash rates stable could help inflation return to target more quickly.

“If you don’t lower the cash rate from here on out, you’re going to have a little bit more downward pressure on demand at the margin,” she said. “Maybe you can get to 2.5 percent a little faster.”

In other words, we are still far from the goal and getting further and further away. So mortgage holders brace themselves because your Christmas bill is about to get higher.