Concerns are escalating that interest rates may rise next year, with some mortgage brokers reporting an uptick in demand for short-term fixed-rate loans.
Borrowers who had been waiting for further RBA cuts are now increasingly racing to lock in short-term fixed options, concerned that the window for lower rates is closing and seeking more certainty, according to some brokers.
Managing director of Evolve Lending and Finance (formerly known as Bell Partners Finance), Mark Stevenson, said his brokerage had seen a notable pick-up in inquiries from borrowers looking to fix, despite the persistent expectation earlier this year that the RBA would continue cutting rates into 2025.
“Something we have been seeing lately is clients switching to a one-year fixed option,” Stevenson said.
“In most cases, they are saving around 0.25 per cent on their current variable rate and also avoiding the usual costs such as discharge and application fees from changing lenders.”
Stevenson said many customers were motivated by uncertainty rather than confidence that interest rates would fall meaningfully in the short term.
Nevertheless, with the official cash rate having held at 3.60 per cent since August – and growing expectation that this may be the end of the rate-easing cycle – borrowers are reassessing their expectations after months of mixed economic signals.
The next rate movement could be up: NAB
New data from the Australian Bureau of Statistics shows that Australia’s headline inflation rate has jumped to 3.8 per cent, while the trimmed mean – the RBA’s preferred gauge, which removes volatile categories such as fuel – rose to 3.3 per cent. Both measures remain above the central bank’s target band of 2–3 per cent and have fuelled expectations that the RBA will keep rates on hold at its December meeting.
“There’s no prospect of more rate cuts this year, and economists don’t expect any relief in the first half of 2026,” Stevenson said.
“We may not see any further rate relief until 2027, and next year there could even be rate rises, so there are challenging times ahead for mortgage holders.”
Industry economists are now openly discussing the possibility that the next move could be upward rather than downward. Among them is National Australia Bank’s chief economist, Sally Auld, who unpacked the major bank’s revised forecasts during a webinar for brokers on Wednesday (26 November). As reported earlier this week, Auld’s analysis suggests the RBA’s rate-cutting cycle has ended for the foreseeable future.
“We have a period which is going to feel a little bit uncomfortable for the Reserve Bank over the next couple of quarters where inflation is sitting too high. It probably means that they won’t be doing anything on rates, and they definitely won’t be cutting rates,” she said.
“This is a central bank that will face into above-target inflation for the first couple of quarters, a labour market that’s fully employed and a growth story where we’re getting back to trend growth. It’s pretty hard to argue against that backdrop that this economy needs lower rates.”
Auld also highlighted uncertainty inside the RBA itself about whether current rate settings are acting as a brake or potentially supporting broader economic conditions.
“One of the things they’re really trying to grapple with is whether or not a cash rate of 3.6 per cent is restrictive, whether it’s neutral – i.e. not acting as a headwind or a stimulant – or possibly whether it could be a setting of monetary policy that’s providing some broad sense of support to the overall economy,” she added.
“While they’re dealing with inflation that’s a bit high, and I guess some uncertainty around actually what the setting of monetary policy is, that’s a central bank I think that won’t be doing much until it has a better understanding.”
She reiterated that NAB now expects rates to remain on hold for an extended period.
“What we’re really going to be watching carefully is whether we’re getting any signals from the data that tell us that maybe this is an economy that’s starting to push up against capacity constraints a bit more quickly than people anticipated,” she said.
Auld added that the combination of stubborn inflation and weakness in household consumption could shift the risk profile for monetary policy.
“The Reserve Bank is not going to like this story. This is why I’m pretty comfortable sitting here telling you that I think the rate cut cycle is over and that we should start to watch for and start to possibly plan for the possibility that rates go up next year,” she said.
“That’s not in our forecast at the moment, but as you can see there are a few things that are starting to flash orange.”
The changes to forecasts come after the RBA’s November meeting minutes signalled that there would be limited scope for further rate cuts over the next year as the board grapples with stubborn inflation, a tight labour market, and uncertainty about how restrictive current policy settings truly are.
While members judged conditions to be “still slightly restrictive”, they also noted signs that financial conditions may be shifting toward the “accommodative side”, reinforcing their decision to remain cautious and keep the cash rate on hold at 3.60 per cent.
Economists from CBA and ANZ said the minutes underscore that upcoming inflation data will be crucial, with both banks expecting only minimal further easing – and ANZ tipping just one final 25-basis point cut in early 2026.
Lenders hiking fixed rates
The changing demand from borrowers comes amid a record-low uptake of fixed-rate loans. Borrowers have, so far this year, remained cautious about fixing their loans given the rate-easing cycle, which began in February 2025.
AFG’s Index for October 2025, for example, reported that fixed-rate loans represented just 1.8 per cent of all broker lodgements in the September quarter – the second-lowest proportion on record – surpassed only by the 1.6 per cent recorded in 2024’s third quarter.
But while brokers are seeing more borrowers shift to fixed rates, the move may be short-lived, as lenders have been increasing their fixed-rate prices recently. Since 1 November, 18 lenders have increased at least one fixed home loan rate, including major banks such as Westpac and Macquarie, while only nine lenders have cut a fixed rate over the same period, according to Canstar rate tracking.
This shift has contributed to a decline in the number of lenders offering fixed rates below 5 per cent. Canstar.com.au data shows that 36 lenders now have at least one fixed rate under 5 per cent, down from 46 a month ago.
[Related: Further rate cuts unlikely amid high inflation: NAB]
