2025 was a good year for mortgage holders, with interest rates decreasing by 0.25% on three separate occasions. The cash rate now sits at 3.6%, and we’ve enjoyed relative peace and quiet after the succession of interest rate rises that began back in 2022.
However, the current state of inflation has led to speculation that interest rates could be on the rise again in 2026. It’s not just idle chatter either – the ‘big four’ banks have all predicted it will be on the cards.
Today we’re going to look at the state of inflation and interest rates in Australia at the moment, and what it could mean for the property market. It’s important to say, that when you’re selling your home it needs to be based on your position in life, not on headlines or what interest rates are doing. You need to do what’s right for you and your next chapter while ignoring the noose around inflation rates.
If you want to chat about how to do that, I’m always here for an honest discussion.
The Current State of Inflation
The stubborn inflation we’ve been experiencing is at the heart of the talk of a potential rate rise. Inflation is defined as the costs of goods and services that a household has to buy. If inflation is going up, life is getting more expensive.
In the latest statistics, October 2025 saw a 3.8% rise in inflation over the last 12 months. This was up from the 3.6% in September 2025. It may not sound like a big increase, but to the Reserve Bank of Australia, it starts to push inflation towards the top of their target range.
‘Trimmed inflation’, which is a measurement preferred by the RBA because it removes large volatile changes, was sitting at 3.3% in October. That’s well above the 2 to 3% range that the Bank aims for.
Basically, while inflation has been higher, it’s not falling as fast or as smoothly as the policymakers at RBA would like – which brings interest rates into the conversation.
Why Inflation Leads to Interest Rate Rises
Interest rates are used by the RBA to manage inflation. Higher rates reduce the spending power of Australians and make borrowing more expensive. This slows down the economy. On the opposite side of things, if inflation is too low and the economy is stagnant, cutting rates will give people more expendable income and encourage activity.
We currently have an official cash rate of 3.6% in place in Australia. Any change would be a rise of .25%, taking it up to 3.85%. Is inflation enough to justify this increase? The banks seem to think so, with Commonwealth Bank Head of Australian Economics Belinda Allen recently saying:
“The economy has picked up more momentum than expected, and that strength is keeping inflation from easing. A small rate increase in February would guide inflation back toward the RBA’s target range of 2–3 per cent.”
This does not mean a rate rise is guaranteed. It does explain why economists see inflation and interest rates as closely linked and why the RBA may feel pressure to act if inflation does not ease further.
When Would a Rate Rise Happen?
The Board of Governors at the RBA meet on the first Tuesday of every month to discuss interest rates and make a decision on whether to hold, increase or decrease.
This meeting doesn’t happen in January however, so the next one will be in early February. That’s when we’ll see if the rate rise predictions are accurate.
That’s still a little while away, and in that time the RBA will be keeping an eye on inflation data, employment figures and the broad state of the economy. If inflation eases from that 3.8% 12-month increase, the cash rate could just stay at 3.6%. If there’s no improvement in inflation, we could be in for a change, though.
What a Rate Increase Means for Buyers
A rate rise affects buyers in two main ways:
First: it slightly reduces borrowing capacity, particularly for buyers already close to their limits.
Second: it influences confidence.
The talk of rate rises can encourage action. Buyers anticipate them and try to secure homes and mortgages before the rate rise kicks in.
We don’t expect a small increase to have much effect on the market. Buyers might think and plan a bit differently or even become a bit more selective – but if a home is priced right and presented well, it’s going to sell regardless of small interest rate changes.
Overpriced and poorly marketed homes? They will be the ones who struggle first.
What Does it Mean for Brisbane Sellers?
Brisbane’s property market has been a solid performer for a couple of years now. We’re one of the most desirable places to live in the world, let alone in the country, and as a result have seen mass interstate and international migration. This population growth, together with limited stock of houses, has supported demand and contributed to the market strength.
A slight interest rise in early 2026 doesn’t necessarily mean prices will fall.
Buyers may become more cautious, but with the right agent on your side who is pricing your property correctly and marketing it properly, you’ll still achieve the result your home deserves.
Contact The Henry Wong Team® for Honest Advice
The Henry Wong Team® had been selling Brisbane real estate for many years. Our network stretches far and wide, and many people turn to us for advice about their property and what their next step should be.
You can be one of them too. If you have any questions about the Brisbane real estate market, we’re here to help with clear and honest advice. We’ll make sure you understand your options and help put you in control of your decisions.
Let’s talk today so you can rest assured you’re planning the right move at the right time.
