Rates bomb: warning of rise drops days before Christmas – realestate.com.au

Two of Australia’s biggest banks have changed their interest rates in the run-up to Christmas, with experts warning borrowers to brace for up to two rate hikes – “not just one”.

In a shock move, the Commonwealth Bank and National Australia Bank now expect the Reserve Bank to raise cash rates at the very first opportunity – a change that will shake up the entire mortgage market.

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The Commonwealth Bank of Australia has also changed its interest rate position and now expects a rate increase as early as February. Photo: Lisa Maree Williams/Getty Images.

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Both are now warning that the Reserve Bank of Australia will raise rates on February 3, a huge reversal given previous predictions that rates would remain on ice for the foreseeable future, according to data from Canstar.com.au.

NAB predicts two increases, in February and May, which would take the cash rate to 4.10 percent at the end of 2026. NAB also increased its fixed mortgage rate on Tuesday by up to 0.20 percentage points, the lowest of which is now 5.39 percent.

CBA expects one rate hike in February, raising the cash rate to 3.85 percent, but warned that further increases are possible.

Canstar.com.au data insights director Sally Tindall warned households to prepare for the possibility of multiple increases in 2026 – “not just one”.

“The rate cuts are behind us now, and what lies ahead could well be a rate hike,” she said.

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Current cash rate forecasts from the big four banks. Source: Canstar.com.au

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Canstar analysis found that two increases next year would increase minimum repayments by $180 per month for someone with an average loan of $600,000 and 25 years to go.

The big four banks are now split on the rate outlook, with Westpac opting for two rate hikes – in May and August – while ANZ continues to expect cash rates to remain unchanged for the foreseeable future.

All this while inflation refuses to behave, growth remains stubbornly strong and the RBA governor issues a ‘blunt warning’ of a possible rate hike in 2026 – sending shockwaves through the mortgage market.

Ms Tindall said: “By the time the RBA meets again in February, it will be armed with more data, including two more monthly inflation prints and another employment report.”

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Number of lenders that have changed at least one fixed rate. Source: Canstar.com.au

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“However, if the CPI does not move in the right direction with confidence, the administration could be forced to take action, especially if the labor market continues to prove resilient under current interest rate conditions.”

She said those considering rate fixing should compare options beyond those offered by the big four banks.

“On a $600,000 mortgage, with 25 years remaining, the difference between choosing ANZ’s lowest two-year rate versus the lowest in the market translates into as much as $4,773 in interest over the next 24 months. That’s not pocket change – that’s a whole monthly repayment for many borrowers – just by shopping around.”

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