As we all know by now, the RBA held the cash rate at 3.60% this week, choosing not to cut (or raise!) at it’s November meeting.
The bank said it didn’t even consider a rate cut this round, mainly because inflation came in “materially higher than expected”.
And the message to borrowers? “Hold tight.” They signalled that inflation won’t settle into its 2-3% target band until the middle of next year, so the idea of a December drop is very much off the table for now.
What about the banks’ crystal-ball forecasts? Well, they’re pretty aligned:
Commonwealth Bank of Australia thinks the cutting cycle may already be done
National Australia Bank sees some room for cuts, but only around mid-next year
Westpac Banking Corporation and ANZ Banking Group are more optimistic, predicting cuts in May and even February respectively.
In short: no fireworks this month, but plenty to keep an eye on for 2026. Reflecting on the year that almost was as it relates to the cash rate, it has been quite the ride, a riude that has started to get a little bit scarier of late.
With this week’s cash rate news in mind it seemed timely to provide some commentary about what lenders are doing with rates at the moment – there’s a bit going on!
Last week saw a slightly mixed picture in the home-loan arena.
On the variable-rate front, more lenders trimmed interest rates than hiked them – around six institutions cut 22 owner-occupier and investor variable rates by an average of ~0.18%, while another six increased 21 variable rates by about 0.09%.
As a result of those changes, the average variable rate for owner-occupiers paying principal and interest now sits at approximately 5.93%.
What about fixed rates?
Fixed-rate loans, however, are moving in a slightly different direction. While a handful of lenders cut some fixed rates (five lenders cut 18 fixed-options by around 0.09%), others are already nudging fixed product pricing higher – two lenders increased eight fixed-rates by an average of 0.24%.
Some of the most competitive one-year fixed deals have disappeared from the market, signalling that the low-rate fixed market may be nearing its bottom.
What is driving the shift?
Lenders and economists appear to be rethinking how far the monetary easing cycle still has to go. In other words: the assumption that rate cuts would keep flowing is being challenged.
Borrower demand for fixing is also weak, fixed loans currently account for only a small share of new business, leading lenders to be more cautious about locking in ultra-low fixed rates.
The bottom line
Variable rates remain competitive (and in some cases are getting cheaper), but fixed-rate deals aren’t necessarily as compelling as they were a few months ago, especially given that the assumption of major forthcoming rate cuts is starting to look less certain.
As always, the best option depends on your individual appetite for risk and certainty.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.
