The changing outlook on interest rates

The bigger question on interest rates right now relates to what the RBA may do in 2026, as the outlook has certainly changed during the second half of 2025. If you look back to what was happening BACK IN JUNE, most of the talk was around when the next cut to interest rates would arrive. But with the inflation figures starting to trend upwards again recently, we are seeing some talk about whether the next move by the Reserve Bank might be to move rates up slightly again. All eyes will be following the inflation figures over the early stages of 2026 to see what happens.

In an environment like this, quite a few homeowners will be wondering what their home loan interest rates will be doing in the year ahead, and when they might return to normal…assuming, of course, we can work out what a “normal” interest rate actually looks like.

You see, defining “normal” for interest rates depends very much on what time frame you look at. Our official cash rate currently sits at 3.6 per cent today, but over the past 20 years or so it has varied from 7.25 per cent in 2008 to 0.1 per cent in 2020. If you look back further, you won’t have to search too hard to find the 1980’s when people were paying 17 to 18 per cent or more on their home loans!

So for those who may be reading about the possibility of a slight hike in interest rates in 2026, and wondering whether you should be locking in the rate on your home loan, I would say be cautious. Be sure to get professional advice from more than one source, and remember that the lenders will only be offering you a rate that they are confident will make them a profit.

In the meantime, if you are weighing up your options for the New Year and would like some experienced and objective real estate advice, you can give our team at Barry Plant Thomastown a call on 9466 3233. We’re always happy to help.

Cheers,

Con Constantinou

Barry Plant Thomastown