What are experts predicting for interest rates in Australia?
Overall, the consensus among the experts and economists is that borrowers should expect at least one more interest rate rise in 2026, either August or September.
However, no one is ruling out further increases if inflation doesn't materially ease. Underlying inflation is at its highest level in almost two years at 3.6% annually.
Inflation has remained stubbornly high and has been further complicated by the conflict in the Middle East, which the RBA says "poses substantial risks" to both the global and Australian economy.
Some experts believe that a de-escalation of the conflict in the Middle East could ease inflationary pressures and reduce the need for further interest rate rises in 2026. However, the RBA has indicated that any improvement would take time to flow through the economy, and inflation remains above its target range of 2-3%.
The average mortgage rate in Australia fell in the first half of 2025 and remained steady for the second half of the year, but has increased in 2026 alongside the cash rate.
Interest rate predictions from the Big Four banks
Australia's four major banks are split on whether the RBA's next move will be another rate hike or a hold. Here's the rationale behind each bank's forecast:
NAB - Predicting a hold in August 2026, with possible cuts early-to-mid 2027
According to Sally Auld, NAB's Chief Economist, Australians should no longer expect another rate hike in 2026, with the cash rate likely to have peaked at 4.35% for this cycle. Over the longer term, NAB expects the RBA to begin cutting rates from early to mid-2027 and forecasts the cash rate will end 2027 at 3.60%.
Commonwealth Bank - Predicting a hold in August 2026, with rate cuts likely in 2027
Commonwealth Bank economists expect the RBA to leave the cash rate unchanged in August and believe it's unlikely to move until the first half of 2027. They’re forecasting a rate cut in May 2027, followed by another in August.
Westpac - Predicting a 25-basis-point cash rate hike in August 2026
Westpac expects a further rate hike in August to offset the likely increase in inflation during the June quarter, with additional hikes still possible this year. Chief Economist Luci Ellis said, "It will take a further unexpected weakening in the domestic economy – and a better inflation outlook – to entirely prevent further cash rate hikes from here."
ANZ - Predicting cash rate to hold in August 2026
ANZ expects the cash rate to remain at 4.35% in August and stay there for the remainder of 2026. The bank is forecasting two rate cuts in 2027, taking the cash rate to 3.85%, after previously expecting rates to remain unchanged for a more prolonged period. It's one of several forecasters to revise its outlook following a turbulent start to 2026.
Interest rate predictions from other banks
Here are the interest rate forecasts of some of Australia’s other large banks.
AMP Bank - Forecasting rate hikes in August and November 2026
According to Dr Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Bank, the RBA's ongoing concerns about inflation make a further rate hike in August likely. Dr Oliver says underlying inflation is trending higher and warns it "will take longer to bring it back under control," leaving the door open to another increase in November.
Bendigo Bank - Forecasting a hold in August, with a rate hike likely in November 2026
Bendigo Bank Chief Economist David Robertson expects the RBA to leave the cash rate unchanged in August before delivering another hike in November. He says the "Australian economy has become a high-stakes tightrope walk for decision makers", with global uncertainty and persistent domestic inflation putting "pressure on the RBA to maintain restrictive rates."
Reserve Bank of Australia interest rate outlook
The RBA's statement following its decision to leave the cash rate unchanged in June 2026 signalled that further rate hikes remain a possibility, while emphasising that the high level of uncertainty means all options remain on the table.
The unanimous decision to hold in June gives the Board more time to assess the impact of the previous three interest rate rises, as well as the effect of oil supply disruptions on inflation. However, Governor Michele Bullock made it clear in her post-meeting press conference that the RBA is prepared to raise rates again if needed to return inflation to its 2–3% target.
“Today’s decision does not rule out further tightening in monetary policy if that is what is required to bring inflation down,” Bullock said. “At the moment inflation is only forecast to come back to target by the middle of 2028, that’s still two years away.”
What if the interest rate predictions come true?
If interest rates rise in line with most economists' forecasts, home loan rates will likely increase by a further 25 basis points in 2026. For the average Australian mortgage of $736,000, that would add around $113 a month to repayments, or $1,356 a year, unless the borrower refinances to a lower rate.
The table below shows how much monthly mortgage repayments would increase across a range of loan sizes if lenders passed on the full 25-basis-point increase.
Note: Calculations assume a 25-year loan term and principal and interest (P&I) repayments, with the interest rate increasing from 5.90% p.a. to 6.15% p.a. following a 25-basis-point rate hike.
When will interest rates in Australia go back down?
Given persistently high inflation and expectations that price pressures will remain elevated for some time, few economists expect the RBA to begin cutting interest rates any time soon.
Among those forecasting rate cuts, including NAB and Commonwealth Bank, the expectation is that the cash rate will begin easing around the middle of 2027.
What drives interest rate forecasts?
Economists factor in a wide range of data, domestic trends and global events when forecasting whether interest rates are likely to rise or fall. But ultimately, they’re trying to anticipate what the RBA will do. Below are the key factors the RBA considers when deciding whether to change the cash rate.
- Inflation: Inflation is the single biggest driver of interest rate decisions. The RBA targets inflation of 2–3% over time, so forecasts largely hinge on whether inflation is expected to remain above target or fall back within that range.
- Employment: The RBA also considers the labour market, with one of its core objectives being to achieve full employment. In simple terms, if unemployment rises sharply, the RBA may lower interest rates to stimulate economic activity. The RBA's target range for ‘full employment’ sits roughly between 4% and 5% unemployment.
- Economic activity: Beyond inflation and employment, the RBA looks at the broader economy to gauge whether demand for goods and services is too strong or too weak. This includes indicators like consumer spending, business investment and government spending.
- Global economic conditions: Australia’s economy is heavily influenced by overseas developments. The RBA considers interest rate settings in other major economies, global growth conditions, and movements in commodity prices like oil and gas, which are currently being affected by the conflict in the Middle East.