The $1,300 sting: RBA rate hike - here's what your mortgage costs now
RBA shocks with 2026 rate hike, mortgage stress returns
After a year on hold and three rate cuts in 2025, the Reserve Bank of Australia has stunned borrowers by kicking off 2026 with a surprise rate hike, adding more than $1,300 a year to the average mortgage.
The RBA lifted the cash rate by 25 basis points in February, taking it to 3.85 per cent, ending hopes the easing cycle would continue and reigniting concerns about mortgage stress just as household budgets were starting to breathe again.
Sign up to The Nightly's newsletters.
Get the first look at the digital newspaper, curated daily stories and breaking headlines delivered to your inbox.
By continuing you agree to our Terms and Privacy Policy.More than half of economists surveyed by Finder.com.au correctly predicted the move, with experts warning the central bank is sending a clear message: inflation remains the bigger enemy than mortgage pain.
What this rate rise means for your mortgage
For a typical owner-occupier with a variable loan, the February increase translates into a noticeable jump in monthly repayments.
Graham Cooke, Finder's head of consumer research, said the relief borrowers felt last year is now at risk of being unwound.
"Mortgage stress had started to ease, but this rate rise will see it return quickly as monthly repayments jump again," he said. "If inflation stays stubborn, much of last year's relief could be wiped out. Refinancing now can lock in a lower rate or better loan structure before the next move."
For borrowers who haven't reviewed their loan in the past 12-18 months, the difference between their current rate and the market could already be significant
Why the RBA moved now
While many borrowers expected rates to remain on hold, economists say a combination of domestic and global pressures forced the RBA's hand.
Inflation remains above the RBA's target band, with CPI sitting at 3.68 per cent, signalling price pressures have not been fully tamed.
At the same time, global financial markets have become increasingly volatile, with concerns growing about political pressure on the US Federal Reserve and the flow-on impact for bond markets worldwide.
Kyle Rodda, market analyst at Capital.com, said instability in US markets can quickly feed into Australian borrowing costs. "If investors demand a higher risk premium in US Treasuries, that pressure flows straight into Australian bond markets, and ultimately into local interest rates," he said.
Nicholas Gruen, CEO of Lateral Economics, warned that undermining central bank independence globally could make inflation harder to control everywhere. "Once credibility is damaged, inflation becomes more difficult to manage," he said.
Why housing hasn't cracked, despite higher rates
Despite rising borrowing costs, economists and and agents say Australia's housing market remains supported by a chronic shortage of homes.
Mathew Tiller, LJ Hooker's group head of research, said tight supply is creating a "floor" under prices that interest rates alone can't break.
"Buyer activity doesn't stop with an interest rate rise, the market just becomes more price-sensitive," he said.
"Population growth is still elevated, new supply is lagging, listings are tight in many markets and investors are returning. That combination is keeping conditions stable."
Tiller said the most likely impact of the rate rise will be longer decision times, slightly higher days on market and tougher negotiations, not a flood of distressed sales.
"We don't expect an influx of forced listings. Mortgage holders have already lived through a long period of higher rates," he said.
Jellis Craig CEO Andrew McCann agreed saying most owner-occupiers in Melbourne had already factored in the risk of a modest rate increase earlier this year.
"Buyers remain remarkably resilient despite the ongoing rate uncertainty," he said.
"The reality is that most buyers had already priced in a marginal increase for the early part of this year, so a 25-basis-point increase is unlikely to deter those who are committed to their next property move."
McCann said while borrowing capacity may be slightly constrained, demand remains firm - helping keep price growth contained rather than derailed.
"Demand is there, but the limitation on what buyers can borrow will keep price growth in a more sustainable, moderate range," he said.
Director of Place Purpose Group, Drew Davies said of the Queensland market: "Brisbane is starting from a position of relative strength compared to the southern capitals. We may see some buyers take a moment to reassess, but the bigger picture hasn't changed. Population growth, tight supply and long-term infrastructure investment continue to drive demand in our city, and most buyers adjust their expectations rather than step away altogether.
"Many buyers we speak with have already sat down with their broker or financial expert of choice and worked through worst-case scenarios, meaning any change is largely planned for rather than unexpected. That's advice we'd encourage anyone to seek before making a purchase."
Property prices still tipped to rise in 2026
Despite the rate shock, economists still expect national home values to keep climbing, just at a slower pace.
According to a Finder survey of 21 economists for it's RBA cash Rate report, prices across the major capitals, prices are forecast to rise by an average of 4.19 per cent over the next 12 months.
- Perth: +5.3%
- Brisbane: +4.8%
- Sydney: +4.7%
- Adelaide: +3.2%
- Melbourne: +3.1%
Tight rental markets are also pulling investors back in, with ABS figures showing investor lending rose 13.6 per cent in the September quarter, while first-home buyer commitments lifted 2.3 per cent.
Why prestige markets play by different rules
While a $158-a-month increase hits households with million-dollar loans hard, agents say the top end of the market operates on a different rhythm.
Abercromby's CEO Sally O'Connell said prestige buyers are far less sensitive to small rate movements. "In premium and blue-chip markets, buyers are typically balance-sheet driven rather than rate-driven," she said.
"Scarcity, lifestyle alignment and long-term value matter far more than a single 25-basis-point move."
O'Connell said she doesn't expect higher rates to trigger distressed selling in the $5 million-plus bracket, but cautioned vendors against unrealistic pricing.
"Momentum is maintained through credible pricing and transparency, not by overreacting to rate headlines," she said.
Mr McCann agreed: "In the upper-premium markets where Jellis Craig operates in Melbourne, we tend not to see this style of behaviour. Buyers in our markets are traditionally more resilient to incremental rate changes and remain highly decisive."
With rates rising again, buyers are already re-running budgets and locking in finance earlier than planned, while sellers may need to be more flexible on price.
"The market will increasingly reward homes that are well-priced and well-presented," Tiller said.
"Understanding how buyers are reacting right now is critical and that starts with a realistic appraisal."
For borrowers hoping the worst is over, the RBA's February move is a clear warning: the fight against inflation isn't done yet, and neither is the pressure on household finances.
Originally published as The $1,300 sting: RBA rate hike - here's what your mortgage costs now
