{"id":300711,"date":"2025-12-05T16:25:07","date_gmt":"2025-12-05T16:25:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/300711\/"},"modified":"2025-12-05T16:25:07","modified_gmt":"2025-12-05T16:25:07","slug":"financial-markets-now-certain-the-rba-will-hike-interest-rates-in-2026-australian-economy","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/300711\/","title":{"rendered":"Financial markets now certain the RBA will hike interest rates in 2026 | Australian economy"},"content":{"rendered":"

Financial markets are now pricing in a 100% chance the Reserve Bank will hike rates<\/a> in 2026, in what would be a blow to mortgage holders but may take some steam out of an overheating property market.<\/p>\n

The latest forecasts represent a turnaround from just two weeks ago, when traders were factoring in an even chance that the next RBA move would be a cut by its May meeting.<\/p>\n

It comes as data showed inflation is now moving in the wrong direction, alongside this week\u2019s national accounts<\/a> and household spending figures which showed the economy is accelerating into the new year.<\/p>\n

Adam Donaldson, the head of interest rates strategy at the Commonwealth Bank, said \u201cthe market has come to the conclusion that the Reserve bank won\u2019t be cutting rates any further\u201d.<\/p>\n

\u201cBasically, from February onwards, the market is starting to price some risk that rates will go up.\u201d<\/p>\n

Data from the Australian Bureau of Statistics showed consumer price growth jumped to 3.8% in the year to October<\/a> \u2013 far higher than expected, and well above the top end of the central bank\u2019s 2-3% target range.<\/p>\n

The pain of higher mortgage costs would be a particular blow to the more than 85,000 first-home buyers this year who have enjoyed three rate cuts in 2025 but now face the prospect of higher repayments.<\/p>\n

Chart showing changes to interest rate predictions over time<\/a><\/p>\n

Sally Tindall, the director of data insights at Canstar, said there was a dwindling number of banks offering loans at interest rates of below 5%, and that she expected fixed rates to climb higher from here as banks factored in the shifting expectations around the RBA\u2019s cash rate.<\/p>\n

While outsmarting the banks was a hard task, Tindall said it was possible that fixing your mortgage at the lowest possible rate could work out for borrowers.<\/p>\n

\u201cIf it suits your finances, right now, based on current forecasts, wouldn\u2019t be the silliest time to fix \u2013 but the key is to shop around.\u201d<\/p>\n

Sign up: AU Breaking News email<\/a><\/p>\n

Three rate cuts this year have helped drive a rapid rise in home prices that has pushed affordability to its worst on record<\/a>.<\/p>\n

As first-time buyers rushed to take advantage of the federal government\u2019s expanded 5% deposit scheme, property investors<\/a> have flooded into the market.<\/p>\n

Analysts at Westpac this week said they now expected property prices nationwide to rise by about 8% in 2025, and by as much as 14% in Brisbane and Perth.<\/p>\n

But the changed outlook for interest rates means that instead of accelerating to 9% next year, national home values should instead climb by 6% \u2013 only cold comfort to those struggling to get on the property ladder.<\/p>\n

All eyes now turn to Tuesday, when the RBA will deliver its final rates decision for 2025 and before the January break.<\/p>\n

Analysts are confident the central bank\u2019s board will hold the cash rate at 3.6%, but will be looking for any pushback against the financial market\u2019s recent \u201chawkish\u201d outlook.<\/p>\n

While traders have moved swiftly to switch from predicting rate cuts to hikes, most economists believe the RBA is more likely to hold through 2026.<\/p>\n

AMP\u2019s chief economist, Shane Oliver, has \u201cdecided to give up on our view of another cut\u201d.<\/p>\n

But Oliver believes financial markets are overestimating the chance of higher rates.<\/p>\n

Unemployment is trending higher, he said, which means the jobs market is still \u201ca little bit soft\u201d.<\/p>\n

\u201cThere\u2019s uncertainty around the reliability of the new monthly consumer price index, and consumer spending seems very dependent on getting discounts, which suggests a degree of fragility.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Financial markets are now pricing in a 100% chance the Reserve Bank will hike rates in 2026, in…\n","protected":false},"author":2,"featured_media":300712,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,1294,56,54,55],"class_list":{"0":"post-300711","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-uk","11":"tag-united-kingdom","12":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/300711","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=300711"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/300711\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/300712"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=300711"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=300711"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=300711"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}