As interest rate cycles go, this was one of the shortest and shallowest in history.

This week, with a stroke of the pen, the Reserve Bank engineered a collision between borrowers’ hopes and economic reality.

After 13 rate hikes over 2022 and 2023, only three were reversed in this interest rate cycle. This is wildly short of the predictions from economists even six months ago.

The story hasn’t unfolded to script – which will leave some disappointed, and others feeling cheated.

In the middle of the year, when inflation was moving down, there were expectations interest rates could bottom out at 2.8 per cent.

There wasn’t meant to be an uptick in inflation. It was supposed to remain on a steady glide path down.

Which only goes to prove that economic prediction is a hazardous occupation – more art than science.

The most optimistic of forecasters now suggest that interest rates will remain on hold at 3.6 per cent in 2026. But the prediction pack is leaning towards at least one and probably two rate hikes next year. Money markets are baking in that bet along with an outside chance there will be three increases.

This will take the rate closer to where it was at the start of this year.

As reprieves go, this is a disappointing one for borrowers.

The Reserve Bank isn’t being definitive on rate rises, but at the press conference after its Tuesday decision to leave rates on hold, there was no suggestion the outcome of its board meeting was a coin toss.

It said the possibility of a cut wasn’t on the table, but the board did engage in a bit of spitballing about future rate hikes.

The RBA doesn’t like to frighten the horses, but it provided a clear hint that – as the Yazz song goes – the only way is up.

Citi economists noted that the RBA board “doesn’t want to alarm households, preferring to give data more time to either validate the nascent concerns or prove that it’s a short-lived hiccup to Australia’s economic recovery”.

For the 3.3 million households with a mortgage, this will dash any hope that their budgets will receive a boost next year from a fall in the cost of servicing their loans.

To be sure, most households have socked away the interest rate cuts this year and applied them to offset accounts.

But at the margin, there are borrowers who have been banking on reducing their mortgage stress.

The 3 per cent serviceability buffer for borrowers, imposed by the Australian Prudential Regulation Authority, will likely continue to protect lenders from any meaningful increase in mortgage defaults.

There is also a cohort of would-be borrowers waiting to apply for a mortgage, based on rates moving further down – or at least not moving up.

The RBA decision is almost certain to put a pin in the residential housing bubble that has been developing this year, charged by property investors.

In recent weeks, signs have already begun to emerge that some of the heat is leaving the property market – with auction clearance rates falling precipitously.

Prices may not fall over the December/January holiday period, but the rate of growth is already beginning to cool.

The RBA didn’t mention the effect that rising rates might have on the property market, nor the impact that the three cuts this year had on the creation of a bubble.

It prefers to characterise the house price swings as the result of the supply of housing.

For borrowers, it will feel like an eternity between now and February when the RBA meets again with fresh data on how inflation and the labour market are tracking.

The Christmas spending period will be one to watch.

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.