RBA Rate Update: February Hike in Sight?

In its December meeting, the RBA held the official cash rate at 3.60%, but noted the economy still has “a degree of excess demand”, and inflation is running above the target band. This means the 4–5 February board meeting could still deliver a 25 bp hike if incoming data justifies it. Analysts are split: NAB now expects two 25 bp hikes (Feb & May), taking rates to 4.10%, and CBA has similarly flagged a Feb rate rise. By contrast, Westpac and ANZ see rates on hold through 2026. In short, the banking sector is divided on the path ahead. All eyes will be on the upcoming inflation prints (Nov/Dec CPI), which could heavily influence the RBA’s February decision.

What this means for borrowers

• Variable-rate borrowers: Any increase (or threat of one) puts immediate pressure on household budgets. Lenders stress-test home loans with a big buffer – for example, a 5% loan might be assessed as if it were 8%, so make sure you have a healthy cushion in your repayment plan.
  
• Fixed-rate borrowers: Many loans fixed during the very low-rate era are now expiring. When a fixed loan rolls over to a much higher variable rate, monthly repayments can jump sharply (RBA research shows some borrowers saw up to 50% higher payments on expiry). If your fixed deal ends soon, it’s wise to plan your next move now (e.g. refinance, split or switch to a new fixed term).
  
• Borrowing power: Small rate moves can knock tens of thousands off what you can borrow. Rising home prices have already tightened budgets, and lenders will still stress-test using the 3% serviceability buffer, so even a small hike could reduce your borrowing capacity.
  
• Budget buffer: With rates are at their highest levels in over a decade, it pays to keep extra savings. Lenders expect borrowers to handle higher payments, so having a financial buffer will protect you if repayments rise suddenly.
  

Loan Strategy & Market Context

This is a good time to revisit your home-loan strategy. Should you fix part of your debt or stay on a variable rate? A split loan (some fixed, some variable) can balance rate security with flexibility. Our brokers can run the numbers and recommend what suits your situation. Refinancing is another option; it simply means switching to a new loan with better rates or terms. Refinancing now could save you money or free up equity for other goals.

Property market – Rate uncertainty has made some buyers cautious. If rates stay low, more buyers may step in, but a surprise rate rise could cool demand. Investors are re-running their rental-yield and cash-flow calculations. Today’s purchasing decisions are often tied to loan strategy – securing a good rate and loan structure can be as important as getting the right price on a property.At OM Financials, we make the home loan process simple and guide you every step of the way. Speak with our brokers today to understand your borrowing power and loan options. Book your free consultation nowomfinancials.com.au or call us anytime on 0478 876 967.