If you’re feeling a bit confused about where interest rates are heading right now – you’re not alone.
Normally, we only do these updates around Reserve Bank meetings… but we’ve seen a spike in mixed headlines lately. Some economists are warning about potential rate rises, while others are saying the next move will still be down.
So let’s break it down simply: what’s changed, what the major banks are predicting, and what it means for your fixed vs variable decision in 2026.
1) Inflation is improving… but it’s still not “in the safe zone”
The latest update is that inflation is cooling, which is good news.
The ABS reported the CPI rose 3.4% over the year to November 2025, down from 3.8% in October.
That’s a step in the right direction – but it’s still above the Reserve Bank’s comfort range of 2–3%, which is why the RBA is unlikely to rush into cuts in the immediate short term.
2) So… are rates going up, down, or staying put?
Right now, the honest answer is:
- Most likely: on hold for a while
- Possible: one more hike (but not a big hiking cycle)
- Likely longer-term: lower rates by late 2026 / beyond
That’s not a cop-out – it’s literally where the big banks are split.
Some major banks are warning we could see a small rise first:
- CBA economists have suggested the RBA may lift rates by 0.25% in February 2026 and see the cash rate higher by end of 2026.
- NAB’s forecast has also pointed to the risk of hikes (some reporting suggests NAB sees two 0.25% increases in early 2026).
But other banks are leaning the other way:
- Westpac’s economics team has revised their outlook to an extended hold through all of 2026, with potential cuts pushed into 2027 if inflation behaves.
- Major commentators (including ABC’s coverage) have also highlighted the divide: inflation is easing, but the RBA still has a “tough call” at the next meeting.
My view (and how I’m advising clients):
I don’t see the RBA doing knee-jerk rate hikes. The more likely outcome is a holding pattern while they watch inflation and spending trends. I feel a rate increase will cause more harm than good, and then the opposite problem can occur.
3) Why fixed rates have moved (even without the RBA moving)
One thing that’s thrown people is this:
Fixed rates have shifted recently – even though the RBA hasn’t.
That’s because fixed rates are heavily influenced by:
- the bond market,
- wholesale funding costs, and
- what banks think is coming next.
In fact, we’ve already seen some banks lift fixed rates heading into early 2026 in anticipation of possible changes.
So if you’ve looked at fixed rates and thought:
“Hang on… why are these creeping up?”
That’s the reason.
4) What does “Should I Fix?” look like right now?
At the moment, fixed vs variable is very close – which means the decision is less about “winning” and more about what you value most.
Here’s the simplest way to think about it:
Fixing can make sense if you want certainty
A fixed rate can be like an insurance policy – you may not beat the market, but you gain peace of mind.
If your life is about to get more expensive or more important to plan (baby, daycare, business changes, single income, renovation, etc.), locking repayments in can be worth it.
Variable can make sense if you want flexibility
Variable is usually better if:
- you want the freedom to refinance easily,
- you’re aggressively paying down debt,
- you want offset flexibility,
- or you believe rates will trend down over the next 12–24 months.
5) My practical recommendation for 2026
Because predictions are mixed, here’s the cleanest strategy I’m using with clients:
Option A: Lock in certainty (and stop stressing)
If you want stable repayments and don’t care about “perfect timing”, fixing part (or all) of your loan can absolutely make sense.
Option B: Hedge your bets (best of both worlds)
A split loan can be a great middle ground:
- part fixed for certainty
- part variable for flexibility
This can reduce stress and keep options open if the market moves.
Option C: Stay variable, but review
If you’re staying variable, the key is making sure you’re not passively “overpaying” because you haven’t reviewed pricing in 6–12 months. We review all of our existing Peasy customer rates every 12 months free of charge, so you don’t have to worry about this part.
Want me to sanity check your options?
The right answer depends on:
- your loan size and repayments,
- how long you’ll keep the property,
- your risk tolerance,
- and whether certainty actually helps your lifestyle.
🎥 Watch the full “Should I Fix for 2026” breakdown here: Should I Fix? Interest Rate Insights and Predictions for 2026
If you want, feel free to reach out to our team to find out;
- what best variable option looks like, and
- what the best 1–3 year fixed options are for your situation.