On a Tuesday afternoon in early February, the Reserve Bank of Australia stands at a familiar threshold: whether to lift the price of borrowing money after a run of cuts that followed the long unwinding of pandemic-era inflation. Nearly every major forecaster and the big four banks have already reached the same conclusion, and markets have largely priced it in, yet a minority of observers insist that holding steady remains a defensible course. For ordinary households carrying variable-rate mortgages, the question is less abstract, since a quarter-point change translates into tens or hundreds of
RBA Expected to Lift Cash Rate as Markets Price 70% Chance of 0.25 Point Hike
Households with variable-rate mortgages face higher minimum repayments at a time when living costs are already elevated.
On a Tuesday afternoon in early February, the Reserve Bank of Australia stands at a familiar threshold: whether to lift the price of borrowing money after a run of cuts that followed the long unwinding of pandemic-era inflation. Nearly every major forecaster and the big four banks have already reached the same conclusion, and markets have largely priced it in, yet a minority of observers insist that holding steady remains a defensible course. For ordinary households carrying variable-rate mortgages, the question is less abstract, since a quarter-point change translates into tens or hundreds of dollars each month, landing on budgets already stretched by the everyday cost of living.
At 2.30pm AEDT, the Reserve Bank of Australia will announce what it intends to do with the official cash rate, the first decision of 2026. A press conference follows an hour later, and the room for surprise is narrower than it might seem. Nearly all of the big four banks, along with major economists and consultancies, expect an increase of 0.25 percentage points. Markets put the odds at roughly 70 per cent, which still leaves a meaningful chance the board chooses otherwise.
That uncertainty is not merely technical. Some observers argue there is a strong case for leaving the rate where it is, so the expected rise is not yet a foregone conclusion. If the board does act, Australia's central bank would become the first major institution to tighten after a series of cuts made as inflation eased following the pandemic, a position that will be noticed well beyond its borders.
For households, the impact would be felt in monthly repayments. Canstar's analysis suggests a owner-occupier with a $600,000 mortgage over 25 years would pay about $90 more each month, while a $1 million loan would rise by $150, to $6,303. These figures assume banks pass the full increase to variable-rate customers, and they arrive at a time when many families are already managing high living costs.
At 2.30pm AEDT, the Reserve Bank of Australia is due to announce what it will do with the official cash rate, after the first board meeting of 2026. A press conference follows at 3.30pm. Going into the announcement, the widely held expectation is a rise.
The forecasting is unusually lined up. All of Australia's big four banks expect a hike, as do economists at major banks and consultancies. Financial markets are pricing in roughly a 70 per cent chance of an increase of 0.25 percentage points. That leaves about a 30 per cent chance, by the same pricing, that the board does something else.
There is a dissenting view. Some observers believe there is a case for the board to leave the cash rate where it is, so the decision is not a formality even if it is the favoured outcome.
If the board does lift rates, the move would carry significance beyond Australia. The RBA would become the first major central bank to raise rates after a series of cuts made as inflation eased in the wake of the COVID-19 pandemic.
For households, the arithmetic is straightforward. Analysis by the financial comparison site Canstar looked at what a 0.25 point rise would do to minimum monthly repayments across a range of mortgage sizes. An owner-occupier with a $600,000 mortgage and 25 years remaining would pay $90 more a month. On a $1 million mortgage, the minimum repayment would go up by $150, to $6,303 a month.
Both figures carry a condition: they assume banks pass the full increase on to their variable-rate customers. Canstar's point is that even a single increase would lift repayments across a wide range of loan sizes, adding to pressure on household budgets that are already strained by elevated living costs.
The decision lands at 2.30pm, and the press conference an hour later should show how the board weighed a hike against the argument for holding steady.
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Even a single increase would lift minimum monthly repayments across a wide range of mortgage sizes.— Canstar analysis
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