Australian borrowers might be breathing a sigh of relief now, but some financial experts suggest this reprieve from interest rate hikes won’t last long. They’re eyeing November as a critical month when rates could climb again.
The Reserve Bank of Australia (RBA) decided on Tuesday to maintain the cash rate at 4.35%, a move expected by 92% of economists surveyed in a poll by Finder, a popular comparison website.
Yet, nearly half of the experts, 44%, anticipate at least one more rise in interest rates before the year ends.
For those forecasting further increases, a significant majority, 69%, pinpoint November as the most probable time for this adjustment, prompting warnings that November holds considerable importance.
Brendan Rynne, a chief economist at KPMG, shared with ABC News that market expectations lean towards a possible November hike, offering the RBA additional time to evaluate forthcoming economic indicators before making their next move.
He said the September-quarter inflation figures and labour market data will give the central bank more information before it makes its next major decision.
“One would expect the rate hike still has to be on the table at some point,” he said.
He noted the economy was still running at full capacity, with unemployment at 4.4 per cent and public sector spending continuing to add to demand.
With household spending still relatively strong, Rynne said the RBA may ultimately need to rely on higher interest rates to slow demand and bring inflation back towards its 2 to 3 per cent target range.
Why rates could still rise again
The RBA has already raised interest rates three times this year as it attempts to bring inflation back towards the midpoint of its target range.
“The only way we’re going to see a drop in spending in this country is probably from the household sector,” Rynne said.
A further rate rise would put additional pressure on households by increasing the cost of borrowing, potentially reducing consumer spending.
Rynne said falling house prices could also affect how Australians spend, through what economists call the “wealth effect”.
“As we feel like our house prices are starting to decline, we feel less wealthy and consume less,” he said.
But the strength of the labour market means households are still spending, despite ongoing cost-of-living pressures.
“We’ve never had more Australians employed than we have at the moment,” Rynne said.
The ‘big four’ banks are now predicting a rate hold
The major banks have also shifted their forecasts following lower-than-expected inflation data released last month.
Westpac recently scrapped its prediction of an August rate rise and said it now expects the RBA to leave rates unchanged for the rest of 2026.
ANZ is also forecasting an extended hold at 4.35 per cent, while the Commonwealth Bank expects rates to remain unchanged into 2027.
NAB’s forecast similarly points to an extended period at the current rate.
UBS Global Wealth Management’s head of Australian equities, Mike Jenneke, told SBS News he was pencilling in one more rate rise in November, although he stressed there was not a high degree of conviction around the call and agreed the tightening cycle was nearing its end.
“The main concern we have is that the RBA has missed its inflation target now for several years and the journey to target remains gradual and is at risk of being derailed,” Jenneke said.
Meanwhile, Ebury chief economist Anthony Malouf told SBS News he expected the RBA to keep rates on hold until the middle of 2027.
He said he expected the cutting cycle to begin in the second half of next year, with August currently pencilled in for the first cut.
What would another hike mean for borrowers?
Australians with mortgages are already paying substantially more following the rate increases earlier this year.
Finder analysis shows someone with an average home loan of $734,878 is now paying an additional $359 a month in interest compared with January.
That’s equivalent to more than $4,300 a year.
Another rate rise could push the average borrower’s additional monthly interest payments above $400.
Finder personal finance specialist Taylor Blackburn said Tuesday’s hold would give borrowers “another moment to catch their breath”, but warned the relief could be short-lived.
“With nearly half of our panel expecting another hike this year, now is the right time to act,” Blackburn said.
He urged borrowers who had not reviewed their mortgage or considered refinancing in the past year to check whether they could secure a better deal.
Why November isn’t a certainty
While November has been tipped as the most likely month for another increase among those expecting one this year, the RBA is not locked into that path.
The central bank will have more data to consider before its November meeting, including September-quarter inflation and further information about employment and household spending.
Rynne said the board would need to weigh those figures against the cumulative impact of the three rate rises already delivered this year.
Inflation remains above the RBA’s target, meaning the central bank faces a difficult balancing act between bringing prices down and putting further pressure on households and the broader economy.