Latest inflation data deals major blow to RBA rate cut hopes
Mortgage holders face a stark choice after shock inflation figures: wait months for official rate relief or take immediate action to secure a better deal.
Homeowners hoping for a reprieve on their mortgage bills won’t get it from the Reserve Bank, but it doesn’t mean they’re out of options.
With today’s unexpectedly high inflation figures all but ruling out hopes for a Melbourne Cup Day rate cut next week, borrowers are being urged to take matters into their own hands, to secure a better deal.
But rates cut hopes aren’t completely dashed – just delayed – with industry experts expecting a rates cut will eventuate in early 2026, but divided on whether it will be February or May.
In the meantime, economists say hundreds of dollars a month could be saved by switching to one of the dozens of lenders still offering lower rates.
Canstar Chief Data Insights Officer Sally Tindall said borrowers should be shopping around.
“Today’s inflation figures have put a nail in the coffin of any hope of an official rate cut,” she said.
“So you have to look out for your own rate and get on the phone.”
Ms Tindall said within the lender market 5.3 per cent was the median rate being charged and well over 30 lenders were offering less than that, including some of the big four banks.
“We’ve found nine lenders who’ve recently cut rates for new customers, but not existing ones. So call up your lender and ask why,” she said.
Rate tracking by Canstar revealed nine lenders had cut variable rates, out of step with the RBA, including big four bank Westpac, and most recently CBA’s offshoot Unloan.
Meanwhile, National Australia Bank economist Sally Auld stressed patience was key for anyone banking on official relief from the Reserve Bank.
“Obviously the inflation numbers were strong and not what the RBA would have liked,” she said.
“What this tells us is the RBA will hold into the first quarter of next year, so mortgage holders need to be patient.”
For many Australians holding a home loan, the message is clear, don’t bank on a rate cut next week. Instead, reach out to your lender today, ask the tough questions and see if they will give you a deal.
Today’s CPI figures showed core inflation running at 3.0 per cent, well above the RBA’s own 2.6 per cent forecast, well higher than the “sweet spot” midpoint of its 2–3 per cent target band and way higher than market and experts’ predictions.
Over the 12 months to September, headline inflation rose to 3.2 per cent, up from 2.1 per cent in June, largely driven by a 2.5 per cent jump in housing costs on the back of winding back government electricity rebates, along with strong rises in recreation and culture, transport.
KPMG chief economist Dr Brendan Rynne said the inflation rates were bad news for homeowners and the wider economy.
“We knew there was going to be an uptick in inflation once electricity rebates were wound back, but unfortunately today’s spike is much higher than any of us anticipated and provides the justification for the RBA to sit on its hands in relation to further rate relief,” he said.
“A closer look at the labour market data also shows that the vast majority of employment in the last twelve months has been in the non-market sector which suggests that further rate cuts are absolutely needed for the private side of the economy to kick start its growth.”
The headline level is the highest level since June 2024 while the RBA’s preferred trimmed mean CPI reached 3.0 per cent, up from 2.7.
Economists had been tipping the quarter’s trimmed mean to come in between 0.7 and 0.9 per cent, instead it came in at 1 per cent.
Stephen Smith, Partner at Deloitte Access Economics, highlighted the 9 per cent jump in electricity costs as state and federal government rebates ended, along with a surprise 6.3 per cent rise in council rates and charges as key drives behind today’s numbers.
“The rise was very much electricity and housing driven. What was unexpected was the property rates and charges segment which was the largest in a decade,” he said.
“It seems to be councils are taking the opportunity to raise rates and fees, but apart from that we’re not seeing much in the way of government factors in today’s numbers.”
Governor Bullock warned earlier in the week that a 30 basis point blowout on the inflation forecast would be a “quite material miss”, warning homeowners couldn’t expect a cut if prices come in high.
David Bassanese, BetaShares’ Chief Economist, said homeowners could forget about a rate cut this year and was scathing of policy makers.
“The takeaway is cost pressures are getting ahead of the economy with rising property prices and consumer growth showing stronger demand,” he said.
“I still feel that the extreme volatility in electricity prices in recent years – due to temporary government subsidies – has indirectly distorted trends in trimmed mean inflation.”
“All that said, just as the lack of competition in area of the service economy are contributing to sticky inflation, so is the abject failure of energy policy in recent years to keep a lid on electricity prices. Our energy policy failures are all the more damming given our abundance of energy resources – from coal, gas, wind, and sunshine!”
Treasurer Jim Chalmers defended the government saying in a statement today’s inflation figures are “much lower than what we inherited”.
“The global economy is volatile and uncertain and that impacts inflation in economies around the world,” he said.
Inflation has ticked up in the most recent data for every major advanced economy, except the United Kingdom where it was flat but remains much higher than here.
RSM Australia Economist Devika Shivadekar said today’s figures were bad news for anyone holding out hope for a pre-Christmas interest rate cut.
“This renewed momentum is likely to catch the RBA’s attention, and we expect it will prompt them to hold rates steady at next week’s meeting,” he said.
“With the downward trend in inflation significantly reversed, RBA policymakers are likely to be increasingly cautious about the potential for a rapid deterioration in the labour market and a sharp rise in unemployment in the coming months.”
Originally published as Latest inflation data deals major blow to RBA rate cut hopes
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