What’s happening for home loans in 2026?

The Reserve Bank of Australia (RBA) held the cash rate steady at 3.60% in December, with Governor Michele Bullock highlighting ongoing “excess demand” across the economy. This imbalance is particularly visible in the housing market.

National home prices rose 0.5% in November, lifting annual growth to 8.7%. This is the fastest pace recorded since May 2024. Strong buyer demand, combined with persistently tight rental vacancy rates, continue to underpin price growth. Without meaningful improvements to housing supply, upward pressure on house prices will likely remain throughout 2026.

Unfortunately, inflation currently sits well above the RBA’s target range of 2–3% and is now forecast to stay outside that band until later this year. Appearing before the Senate Economics Legislation Committee in Canberra earlier this week, RBA Governor Bullock acknowledged the challenge facing the central bank. “That is the whole purpose of the board: to try and bring [inflation] back sustainably. Have we done it yet? No, we haven’t done it yet,” she said. “We need to keep working on this.”

As of December 2025, markets were pricing in an early rate cut for 2026 (happy new year to mortgage holders, right?) - but that was before the higher than expected inflation data came out. Now, potential rate hikes are being talked about - making for a less happy new year for homeowners waiting on those (un)festive credit card bills! 

At the same time, banks have already been revising expectations, with fixed-rate offers tightening and, in some cases, increasing. All major banks now broadly agree that we’re unlikely to see any interest rate cuts in the first part of the new year - at least.

REA Group executive manager of economics Angus Moore said persistently high inflation has delayed expectations for easing. “Higher-than-expected inflation has pushed out when, or even if, the RBA is going to cut rates again,” he said.

The RBA is also monitoring labour market conditions closely. The unemployment rate rose to 4.5% last September, and a sustained increase could eventually support the case for lower rates. However, monthly employment data can be volatile and the current level of unemployment remains low by historical standards.

Did policy make it worse? Maybe.

Recent government policy changes are also reshaping home buyer behaviour. The federal Home Guarantee Scheme was expanded on 1 October, allowing more first home buyers to enter the market with deposits as low as 5%. Since the expansion, buyer demand has accelerated noticeably.

Increasing the pool of eligible home buyers intensifies competition for limited housing stock, with many buyers moving quickly in anticipation of further price growth. Investors, too, are responding to rising demand, seeking to enter the market before competition increases even further.

Borrowers looking to move, sell or refinance are also navigating increased competition following the introduction of the long-awaited Help to Buy scheme. From 5 December, eligible low-income households can enter shared equity arrangements with the federal government, requiring deposits as low as 2%, subject to property price caps. Participants will also avoid paying lenders’ mortgage insurance.

Your options for a better home loan

In the absence of another RBA rate cut, it’s still possible to improve your mortgage. Strong levels of purchasing and refinancing activity mean lenders are continuing to compete aggressively for new and existing customers. This puts you in a good position to renegotiate your home loan - especially if you consult an expert mortgage broker.

Borrowers who haven’t reviewed their home loan recently have an opportunity to negotiate sharper pricing, either directly with their lender or with the support of a broker. Brokers, in particular, have visibility over a broader range of market offers and can sometimes access interest rates and loan packages that aren’t publicly advertised.

Rising property values are also working in favour of many existing homeowners. As values increase your loan-to-value ratio improves, reducing perceived risk for lenders and potentially opening the door to lower interest rates, or access to your home equity.

So, the big question: should you fix your home loan?

If you've been struggling to keep up your home loan repayments in the middle of a cost of living crisis, you’re not alone. This could be your chance to rest easier at night. Locking in your lower interest rate now could also lock in thousands of dollars off your home loan repayments - and keep your household budget under control. 

Rather than trying to time the market, the focus should remain on your individual cash flow, borrowing capacity, and long-term affordability. Ensuring your repayments are manageable not just today, but for the foreseeable future, remains the most reliable foundation for navigating an increasingly competitive housing - and home loan - market.