RBA Expected to Lift Interest Rates as Inflation Pressures Persist

Australians are bracing for a potential interest rate rise, with markets widely expecting the Reserve Bank of Australia to increase the official cash rate at its February meeting.

Economists are forecasting a 0.25 percentage point rise, which would take the cash rate from 3.60 per cent to around 3.85 per cent. If delivered, this would mark the first rate hike in nearly two years, signalling the RBA’s renewed focus on containing inflation that has remained stubbornly above its target range.

Recent economic data shows inflation pressures easing only gradually, supported by strong employment conditions and resilient consumer spending. While these are positive signs for the broader economy, they also reduce the urgency for rate cuts and increase the likelihood of tighter monetary policy.

Financial markets have largely priced in the move, with investors positioning for higher rates and the Australian dollar strengthening ahead of the decision. At the same time, cost-of-living pressures continue to weigh heavily on households.

What this means for homeowners and investors

Homeowners
For Australians with variable-rate mortgages, a rate rise would likely flow through to higher repayments within weeks. Even a modest increase can add hundreds — or thousands — of dollars a year to household budgets, particularly for borrowers who took on larger loans during the low-rate years. Fixed-rate borrowers nearing the end of their terms may also face a sharper adjustment when refinancing.

This reinforces the importance of reviewing cash flow, understanding loan structures, and ensuring buffers are in place as rates remain higher for longer.

Property investors
Investors may feel the pressure through higher interest costs and tighter margins, particularly if rental income has not kept pace with repayments. However, strong rental demand and low vacancy rates in many parts of Australia may help offset some of the impact.

For investors, the focus should be on long-term strategy — reviewing debt levels, stress-testing portfolios, and ensuring investment decisions remain aligned with broader financial goals rather than short-term rate movements.

The RBA’s decision will provide an important signal on how restrictive monetary policy may remain throughout 2026, and whether further adjustments are likely later in the year.

Need clarity in a changing rate environment?

Interest rate decisions don’t just affect mortgages — they influence cash flow, investment strategy, superannuation and long-term financial security. Whether you’re a homeowner, investor, or both, having the right advice can make a meaningful difference.

HPartners works with Australians to make sense of change, build resilience, and plan with confidence — no guesswork, no one-size-fits-all solutions. If you’re unsure how rising rates may affect your position, now is the time to review your strategy.