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RBA Governor Michele Bullock will announce the next monetary policy decision in February. Picture: NewsWire \/ Christian Gilles<\/p>\n
A slowdown in inflation has handed mortgage holders a temporary lifeline and raised fresh hope that another punishing interest rate hike may be pushed further down the road.<\/p>\n
New figures show Australia\u2019s headline annual inflation rate cooled to 3.4 per cent, down from 3.8 per cent, in the 12 months to November.<\/p>\n
It was a sharper-than-expected fall that will be closely watched inside the Reserve Bank\u2019s Martin Place headquarters.<\/p>\n
Even more crucially for homeowners, the trimmed mean inflation rate, the RBA\u2019s preferred gauge because it strips out volatile items like fuel, slipped to 3.2 per cent from 3.3 per cent over the year.<\/p>\n
For millions of already stretched borrowers, the numbers offer hope that rates may not be increased as early as some have predicted.<\/p>\n
MORE: Home prices fall in two major capitals<\/a><\/p>\n Two of the big four banks had forecast rate hikes in February.<\/p>\n MORE: Sad reason Hemsworth\u2019s town is now Australia\u2019s worst<\/a><\/p>\n Until now, fears had been growing that stubborn inflation would force the RBA\u2019s hand early in the new year, delivering another rate hike.<\/p>\n Among the groups who had expected rate hikes was Commonwealth Bank, which had forecast in November that the Reserve Bank could raise the cash rate as early as February.<\/p>\n NAB had forecast a rate hike in February and an additional hike in May. Other banks had been quietly increased fixed rates \u2013 normally a bet that the cash rate will rise.<\/p>\n The latest data won\u2019t rule out any hikes in 2026 but does strengthen the case for patience and gives the central bank breathing room to keep rates on hold while it waits for inflation to fall into its target band of 2-3 per cent.<\/p>\n VanEck deputy of investments Jamie Hannah said the fall in inflation would make the case for an imminent rate hike weaker, but the rates outlook remained uncertain.<\/p>\n Canstar\u2019s Sally Tindall said rate hikes weren\u2019t off the cards just yet, but they may be delayed.<\/p>\n \u201cHad inflation continued to move north, this could have sealed the deal for a rate hike next month, which would be the first increase in more than two years,\u201d Mr Hannah said.<\/p>\n \u201cAs it stands, the positive developments from today\u2019s inflation print could be enough to keep the rate hike wolves at bay for now, but the outlook over 2026 is far from certain.\u201d<\/p>\n Mr Hannah said there was still a chance of rate hikes later in the year.<\/p>\n \u201cAfter three rate cuts last year, the RBA is, at best, keeping any further movement on hold. It has, however, hinted at tightening in 2026,\u201d he said.<\/p>\n \u201cInflation remains elevated, and between government energy rebates rolling off, higher tariffs flowing through to consumer prices, and geopolitical conflicts impacting major supply chains \u2013 not to mention the stickiness of services and housing inflation \u2013 keeping it on a tight leash this year will not be straightforward.\u201d<\/p>\n MORE: Insane salary you now need to live in Sydney in 2026<\/a><\/p>\n Geopolitical events, such as US President\u2019s Donald Trump action in Venezuela could influence the direction of monetary policy in Australia. Picture: Getty Images<\/p>\n Canstar insights manager Sally Tindall said the RBA would be eagerly awaiting the results from a suite of other soon to be released datasets.<\/p>\n \u201cThis result takes some heat off the RBA and the case for a February cash rate hike. That said, much will depend on the next few datasets due out before the RBA\u2019s next meeting . In particular, the RBA will be looking at the more robust quarterly trimmed mean inflation figure due out on the 28th of January. <\/p>\n \u201cIt will also be keeping a keen eye on the jobs market, with the next round of Labour Force figures due out from the ABS on the 22nd. <\/p>\n Ms Tindall said borrowers should still prepare for a hike. <\/p>\n \u201cCheck what your monthly repayments would rise to on the back of a hike and make sure you can afford this figure,\u201d she said.<\/p>\n \u201cMany borrowers are already paying extra into their mortgage, having not adjusted their repayments following the three cash rate cuts in 2025, and will already be in a good position to take on a hike, as unattractive as that prospect might be. <\/p>\n \u201cSecondly. Check your rate and size it up against the competition. The average owner-occupier is on a variable rate of 5.51 per cent. You want to be well below this mark. In fact, if you have a good track record of paying down your debt there\u2019s no reason you shouldn\u2019t be on a rate below 5.25 per cent as an owner-occupier.\u201d <\/p>\n Compare the Market\u2019s Chris Ford urged homeowners to be cautious. <\/p>\n \u201cAt this stage we don\u2019t know if the easing was a blip, or a more sustainable trend,\u201d he said. <\/p>\n Uncertainty over rate hikes has tempered property demand in recent weeks.<\/p>\n \u201cRemember that the RBA inflation target is between 2-3 per cent, and the November figure is poking above that at 3.4 per cent.<\/p>\n \u201cUnfortunately, homeowners are going to have to cope with more uncertainty this year. The December quarter CPI data, due for release later this month could be the real bellwether for where rates are headed.\u201d<\/p>\n MORE: Jen Hawkins\u2019 secret $6m blow amid backlash<\/a><\/p>\n MORE: Usman Khawaja\u2019s $9m plan for retirement<\/a><\/p>\n<\/p>\n
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