The Reserve Bank of Australia has closed out 2025 by holding the official cash rate at 3.60% at its final board meeting of the year. The decision was universally expected, but the accompanying statement was the real story. After a year that delivered three rate cuts and meaningful relief for mortgage holders, the RBA has wrapped up 2025 by putting borrowers on notice: if inflation does not continue to fall in the new year, the board will not hesitate to lift rates again. Here's what the final decision of 2025 means as we head into 2026. (Source: RBA Media Release)

The Decision

At its meeting on 9 December 2025, the RBA board voted to maintain the cash rate at 3.60%. While the hold came as no surprise, the language in the post-meeting statement was markedly more direct than at previous meetings. The board explicitly flagged that it had reviewed its inflation forecasts and found them to have shifted upward compared to its August projections. It noted that rates had fallen materially during 2025 and that any further easing would need to be clearly justified by the data - with the strong implication that the next move could equally be up as down.

The 2025 Rate Cycle in Review

It's worth reflecting on just how much changed during 2025 before considering what 2026 might bring:

  • Three cuts delivered: The RBA cut rates in February (to 4.10%), May (to 3.85%), and August (to 3.60%), delivering 75 basis points of total easing across the year. This was the first easing cycle since 2020.
  • Inflation returned to target, then edged back up: The rate cuts were justified by inflation returning to the 2-3% target band. However, by Q3 2025, trimmed mean inflation had crept back toward 3.0%, raising questions about whether the easing cycle had gone too far too fast.
  • Property markets responded strongly: Lower rates combined with pent-up demand drove renewed activity in property markets, particularly in Queensland. Price growth returned in many markets across the second half of the year.
  • Fuel and energy costs remained elevated: External pressures from global energy markets kept headline inflation stickier than the RBA had hoped, complicating its ability to declare the job done.

What This Means for Borrowers

The three cuts delivered this year have provided genuine relief. For a borrower with a $600,000 variable rate mortgage with 25 years remaining, the 75 basis point reduction from the 2023 peak of 4.35% to the current 3.60% equates to roughly $234 less per month in repayments. That's real money back in the household budget.

But the December statement changes the outlook for 2026. Borrowers should no longer plan on further cuts as a baseline assumption. The possibility of a rate increase - the first since November 2023 - has moved from remote to genuinely plausible if the inflation data doesn't cooperate.

  • Variable rate borrowers should review their financial position with the assumption that the current rate of 3.60% may be the floor, not a stepping stone to something lower.
  • Fixed rate borrowers coming off their fixed terms in early 2026 should engage with a broker sooner rather than later. The fixed rate options available now may look very attractive compared to what's on offer if rates begin to rise.
  • Those with high loan-to-value ratios or stretched budgets should be particularly proactive - rate rises are significantly more damaging when your loan balance is high or your repayment buffer is thin.

What You Should Do Now

The end of year is the right moment to sit down and honestly assess your home loan position heading into 2026. Here's what to focus on:

  • Get a full loan review before February: The next RBA board meeting is in February 2026, and the board has signalled it will be watching the Q4 inflation data closely. Getting your loan in order before that meeting - whether by refinancing, restructuring, or building your offset - puts you in a stronger position regardless of what the RBA decides.
  • Build a repayment buffer now: If your repayments have fallen throughout 2025, consider directing those savings into your offset account or redraw facility. Having a buffer means you can absorb a rate rise without it immediately affecting your day-to-day finances.
  • Explore fixed rate options: With rates possibly heading higher in 2026, locking in a portion of your loan at a competitive fixed rate now could provide valuable certainty. A broker can show you what's available and help you model the trade-offs.
  • Don't assume your lender will look after you: In a rising rate environment, lenders rarely pass on hikes slower than cuts. Being proactive and negotiating from a position of knowledge - or refinancing to a better product - is far more effective than waiting and hoping.

2025 was a good year for borrowers, but 2026 is shaping up to be more complex. The team at Loan Hive will be watching every development closely and is ready to help you navigate whatever comes next. Get in touch with us before the new year to make sure you're set up for success in 2026.