Rate Alert
Inflation has come in hotter than the Reserve Bank expected, and borrowers across the country should now plan for a fifth rate rise this year. The Australian Bureau of Statistics reported on 28 October that annual CPI rose to 4.3 per cent in September, up from 4.0 per cent in August and above the 4.2 per cent economists had forecast.
The RBA Board meets on Tuesday 3 November, Melbourne Cup Day. With the cash rate at 4.60 per cent after the September increase, a further 0.25 percentage point rise would take it to 4.85 per cent. For variable rate borrowers in Sydney, Melbourne, Brisbane, Perth or the regions, the question is no longer whether pressure is building, but how much room your budget has if it does.
Headline inflation at 4.3 per cent sits well above the RBA's 2 to 3 per cent target band. The more important number for the Board is the trimmed mean, which strips out the most volatile price movements. It rose 1.0 per cent over the September quarter, above the RBA's own August forecast of 0.8 per cent, and the monthly series shows annual underlying inflation at 3.6 per cent, up from a revised 3.5 per cent in August.
The gap between headline and underlying inflation reflects automotive fuel, which the ABS noted was a key driver of the difference. Energy prices linked to the conflict in the Middle East have lifted headline CPI, but the RBA is more concerned that underlying price growth is not easing as quickly as it hoped. A 1.0 per cent quarterly trimmed mean annualises to about 4 per cent, a pace the Board has repeatedly said is inconsistent with returning inflation to target.
Quarterly trimmed mean of 1.0 per cent matched the forecasts of CBA, NAB and ANZ, and exceeded the RBA's 0.8 per cent projection. A result above the Bank's own forecast is the type of surprise that tends to move the Board.
Before the data, CBA and NAB had tipped the RBA to hold in November after a weak September jobs report. Both have since revised their calls, and all of the big four banks now expect a 0.25 percentage point increase on 3 November. ANZ had held that view since late August. Market pricing has also shifted sharply, with reports putting the probability of a rise at around 85 per cent, up from roughly 69 per cent before the release.
That is a forecast, not a decision. The Board has surprised before, and the weaker employment data is a genuine counterweight. But for planning purposes, a prudent borrower treats 4.85 per cent as the base case.
Assuming a lender passes on the full 0.25 percentage point increase, and using the current average variable rate of 6.34 per cent moving to 6.59 per cent on a 30-year principal and interest loan, the monthly impact looks like this:
| Loan balance | Current monthly (6.34%) | After rise (6.59%) | Monthly increase | Annual increase |
|---|---|---|---|---|
| $500,000 | $3,108 | $3,190 | +$82 | +$984 |
| $700,000 | $4,351 | $4,466 | +$115 | +$1,380 |
| $900,000 | $5,594 | $5,742 | +$148 | +$1,776 |
These figures are illustrative and use a single rate for simplicity. Your actual rate depends on your lender, loan-to-value ratio and whether you have received a discount. The pattern matters more than the precise dollar amount: each rise compounds on the last, and a fifth increase this year would leave a $700,000 borrower paying several hundred dollars a month more than they were in December 2025.
Higher rates also reduce how much lenders will let you borrow. Banks assess new loans at a buffer above the actual rate, so every increase in the cash rate flows through to a lower assessed capacity. Cotality has estimated that the rises so far this year have cut average borrowing power by around $90,000, and another increase would trim that further.
At the same time, home values are falling. Cotality's September index showed national values down 1.1 per cent for the month and 5.2 per cent below the March peak, with Sydney 8.6 per cent below its February high, while Perth and Darwin remain well above year-ago levels. For buyers, that means more negotiating power, but only for those whose finance holds up. Pre-approvals issued some months ago may have been assessed at lower buffers, so it is worth having yours refreshed before you bid.
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Sources: Australian Bureau of Statistics (September 2026 CPI), Reserve Bank of Australia, Cotality Home Value Index (September 2026), and bank economist forecasts as reported by ABC News and Savings.com.au.
Nothing is certain until the Board announces its decision at 2:30pm AEST on Tuesday 3 November. However, after the September CPI result, market pricing and the forecasts of the major banks point strongly towards a 0.25 percentage point increase to 4.85 per cent. Borrowers who would struggle with a further rise should model their repayments at 4.85 per cent now rather than waiting for the announcement.
A 0.25 percentage point increase adds roughly $41 per month for every $200,000 of loan balance on a 30-year principal and interest loan. On a $700,000 loan that is about $115 more per month, or $1,380 a year, assuming the lender passes on the full increase. Lenders generally pass on rises within two to four weeks.
Fixed rates already price in market expectations of a rise, so fixing after a strong CPI print rarely locks in a bargain. A split loan, where part of the balance is fixed and part stays variable, can balance certainty against flexibility. It is also worth checking whether your current lender is charging more than competitors, because refinancing to a sharper variable rate can offset much of a rise without any fixing at all.
Disclaimer: This article is general information only and does not constitute financial, mortgage, or credit advice. Rate forecasts are opinions and may not occur. Before changing your loan structure, refinancing, or fixing your interest rate, speak with a qualified mortgage broker or financial adviser who can assess your situation. Mankin Finance Pty Ltd holds Australian Credit Licence 389087.
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