In a move signalling growing economic pressures, the Commonwealth Bank of Australia (CBA) has increased its fixed-rate home loans. This decision comes as major financial institutions, including CBA itself, now predict the Reserve Bank of Australia (RBA) will resume lifting the official cash rate in early 2026, following a recent uptick in inflation.
Major Bank Adjusts Rates Ahead of Predicted RBA Moves
The bank has lifted rates for both owner-occupiers and investors, with the changes taking effect from January 15. The most significant increase is for three-year fixed loans, which have risen by 0.7 percentage points to 6.19% for owner-occupiers. For investors seeking a three-year fixed term, the rate is now 6.24%, a jump of 0.6 points.
CBA's most competitive fixed offer is now a two-year rate for owner-occupiers at 5.94%, which has increased by 0.35 points. Following these adjustments, CBA's fixed rates now sit above those offered by its main competitors, Westpac and ANZ, for comparable products.
The Rising Cost of Mortgages for Australian Borrowers
This shift is a direct response to changing economic forecasts. Both CBA and National Australia Bank (NAB) have revised their outlooks, now expecting the RBA to increase rates after inflation edged higher late last year. CBA is forecasting the cash rate to reach 3.85% by December.
The financial impact on households could be substantial. Analysts warn that even a modest rate rise can add hundreds of dollars per year to the average mortgage, straining budgets that are already tight. A single 0.25 percentage point increase from the RBA would add approximately:
- $75 per month to repayments on a $500,000 owner-occupier loan over 25 years.
- Roughly $20 extra per week on a typical home loan.
- More than $1,000 in additional costs over a full year.
Diverging Forecasts and the Search for the Best Rate
While the trend points towards higher borrowing costs, predictions for the timing vary among the big four banks. NAB is predicting two RBA hikes this year, potentially in February and May. In contrast, Westpac and ANZ expect the cash rate to remain steady throughout 2026.
For borrowers currently shopping around, CBA's moves have widened the gap with other lenders. For example, Westpac is offering 5.59% and ANZ 5.44% on comparable two-year fixed terms. According to financial comparison site Canstar, some of the lowest two-year fixed rates currently available are from insurers and smaller banks, with NRMA Insurance offering 5.29% on a $500,000 loan.
The RBA's next meeting is scheduled for February 3, with its decision due at 2:30 pm. This meeting will be closely watched by markets and mortgage holders alike, as it sets the tone for the year ahead in Australia's financial landscape.
