Interest rates are once again front of mind for Australian mortgage holders in 2026.
In its first policy meeting of the year, the Reserve Bank of Australia (RBA) raised the official cash rate by 25 basis points to 3.85% — the first increase in over two years, and a sign policymakers are responding to inflation pressures that have proven stronger than expected. Markets and analysts are now debating whether this is the start of a new tightening cycle — and whether more rate rises could be on the horizon.
The RBA has stressed its commitment to doing “what is necessary” to bring inflation back toward the target range of 2–3%, a message that includes the possibility of further rate hikes if inflation doesn’t moderate. Governor Michele Bullock has emphasised that future monetary policy decisions will depend on upcoming economic data, particularly inflation and labour market conditions.
So the big question for many homeowners and buyers is:
Does this shift in the rate outlook make fixing your home loan a good idea?
Why Fixing Makes Sense for Some Borrowers
Fixing your interest rate gives you certainty — you lock in a repayment amount for the term you choose, shielding you from future increases while your fixed period runs.
🔹 Budget certainty
If your cash flow is tight or if you want predictable repayments for the next few years, fixing can provide peace of mind.
🔹 Protection against future rate rises
With inflation still above the RBA’s target band and inflationary pressures persistent, there’s a real possibility that the RBA could tighten again in 2026 to anchor price growth.
🔹 Useful for planning major life events
If you’re planning a baby, changing jobs, or buying a car — predictable repayments can help you budget more confidently.
But Fixing Isn’t Right for Everyone
Fixing does come with trade-offs.
❌ Less flexibility
Many fixed rate loans restrict access to features like offset accounts and additional repayments (or charge a fee to break the fixed term).
❌ You miss out if rates fall
If the RBA pauses, or inflation falls faster than expected, variable rates could soften — and you’d miss out on the savings.
❌ Break costs can be high
If your circumstances change (sell, refinance, upgrade), exiting a fixed rate early could cost you.
A Middle Ground: Split Loans
Many borrowers are choosing a split strategy — locking in a portion of their loan at a fixed rate while leaving the remainder variable.
This can give you the best of both worlds:
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Stability on part of your repayments
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Flexibility and potential upside if variable rates soften
It can be an effective approach when the future direction of rates is uncertain — as it is now.
Looking Ahead: What 2026 Might Bring
Economists and markets are divided on how many rate moves the RBA might make this year. Some suggest the February hike could be followed by another increase later in 2026 if inflation remains persistent, while others see a more cautious approach if economic conditions soften.
The key takeaway is this:
👉 The RBA is prioritising inflation control and is ready to adjust rates if necessary.
For mortgage holders, that means staying informed — and considering your options before your next rate reset or fixed term expiry.
Bottom Line: What Should You Do?
✔ If you value certainty — fixing part or all of your loan could be right for you
✔ If you want flexibility — staying variable or splitting may suit better
✔ If your fixed rate is expiring soon — now is a great time to review your strategy
A tailored home loan review can help you compare what fixing vs remaining variable would mean for your repayments and goals.
Want a personalised breakdown of whether fixing makes sense for your home loan?
📩 Get in touch today for a free strategy review.