Borrowers hoping for more cuts next year may need to adjust expectations after a run of higher-than-expected inflation.
The Reserve Bank of Australia (RBA) kept the cash rate at 3.60% in December, but inflation has climbed to 3.8% after four consecutive monthly increases. If inflation remains above the 2–3% target band in 2026, the RBA is unlikely to cut rates – and some economists warn the next move could even be up.
Speaking after the decision, RBA governor Michele Bullock said: “I don’t think there are interest rate cuts on the horizon for the foreseeable future.”
Economist Warren Hogan went further, calling on the RBA to start hiking rates from the first quarter of 2026.
How this affects your loan in 2026
- Coming off a fixed rate – Your repayments may jump. Reviewing your loan now can help you plan ahead and avoid pressure later.
- On a variable rate – Banks can change pricing independently of the RBA. A quick comparison may uncover a sharper rate or a more stable structure.
- Planning ahead – The next six months will be important as lenders adjust to shifting inflation expectations and new lending rules. Being proactive can help you stay in control of your repayments.
If you’d like clarity on how the rate outlook affects you, we can review your loan and show you options for the year ahead.
New Lending Rules May Affect Borrowing
An impending change could reduce how much some borrowers can borrow – but the impact will vary widely between authorised deposit-taking institutions (ADIs) that issue home loans.
From 1 February 2026, ADIs must ensure no more than 20% of their new home loans go to borrowers whose loan size is six times their income or more. For context, that would mean a loan of more than $600,000 for someone earning $100,000 a year.
The new rule aims to cool higher-risk lending and keep the financial system stable.
What is an ADI?
An ADI is a financial institution licensed by the government to hold your money, which includes all the major banks you know – CBA, Westpac, NAB and ANZ – along with many smaller banks, credit unions and building societies. Non-bank lenders aren’t ADIs because they don’t take deposits; they only offer loans.
Five key takeaways
- Some borrowing limits may tighten if your income and loan size sit near the threshold.
- Different ADIs, different results – lenders interpret the rules differently, so borrowing capacity can vary a lot.
- A bigger deposit helps – lowering the loan-to-income ratio can expand your options.
- Income matters – even a small rise can improve your position.
- Broker guidance is crucial – especially when lenders start applying their own internal policies on top of this new rule.
Wondering how the changes affect your borrowing power? We can compare lenders and help you find a structure that fits your plans.
Help to Buy Opens New Pathways
A major shared-equity scheme has finally launched, giving eligible buyers a new low-deposit pathway into the market.
Help to Buy went live on 5 December, three years after it was first proposed. Under the scheme, the federal government contributes up to 40% of a new property’s purchase price and up to 30% of an existing home. Buyers need only a 2% deposit and pay no lenders’ mortgage insurance.
Key eligibility points
- The government takes an ownership share in your property.
- You must be an owner-occupier.
- Income thresholds apply – $100k for singles, $160k for single parents and joint applicants.
- Why buyers are considering it
Help to Buy can open doors for people who remain priced out even after using other schemes. By reducing upfront and ongoing costs, it can make buying sooner a realistic option.
But there are trade-offs
Shared equity affects your long-term position, and lenders assess these applications differently. It’s important to compare this path with other ways into the market.
Reach out if you’d like to see how Help to Buy compares with your other pathways into the market.
Tight Supply Keeps Prices Climbing
Low stock and rising prices are creating a tougher market for buyers but unexpected opportunities for homeowners.
Australia’s median property price rose 1.0% in November and 3.1% over the quarter, according to Cotality. At the same time, SQM Research reports total listings fell 5.4% month-on-month and new listings dropped 11.3%. With fewer homes hitting the market, buyers are competing harder for what’s available.
If you’re buying
- Expect more competition – fewer listings mean faster sales.
- Pre-approval boosts your chances – sellers often choose buyers who can move quickly.
- Clarity is key – knowing your budget and non-negotiables helps you avoid overpaying.
If you’re a homeowner
- Your equity may have grown – rising prices can improve borrowing options.
- Equity can unlock upgrades – refinancing, renovating or upsizing become more achievable.
- A quick equity check helps you plan – and shows what’s possible next year.
If you want to check your borrowing position or understand how much equity you’ve gained, we can run the numbers and show you your options.
If you are buying, re-financing or have any questions, contact Sal Cinque on the below information.
TAG Finance and Loans
Sal Cinque | CEO
03 9886 0800 | loans@tagfinancial.com.au
Disclaimer: The information contained on this page is general in nature. Professional advice should be sought before acting on any aspect on this page. TAG Finance and Loans Pty Ltd ABN 25 609 906 863 Credit Representative Number 483873 National Mortgage Brokers Pty Ltd ABN 88 093 874 376 Australian Credit License 391209.