Another rate hike is all but certain this year, with global tensions layering on top of Australia’s already “baked in” inflation crisis, according to Compare the Market’s Economic Director David Koch.
Pressure is mounting on the Reserve Bank to take quick action to quash inflation, as expensive fuel and supply shortages threaten to escalate prices further this year.
Mr Koch said it wasn’t a question of ‘if’, but ‘when’ rates would move again.
“Australia has been chasing down inflation for several months and now to everyone’s horror, the situation could get much worse because of the war with Iran,” Mr Koch said.
“Higher fuel prices have a huge inflationary ripple effect through the entire economy as it costs more to fill up the trucks that transport your groceries from farms and suppliers to the supermarket, and that extra cost is passed on to consumers through higher prices.
“Anything that’s imported – whether that’s clothes, homewares, or other supplies – will be impacted by the cost of fueling ships and planes.
“It’s a real worry for Michele Bullock, who knows that if conflict in the Middle East is here for the medium to long term, it’ll be shocking for inflation.
“Unfortunately for homeowners, the cash rate is the only real lever the RBA has to try to rein in spending and disrupt the trajectory of product pricing.
“While many economists are predicting a rate increase at next week’s RBA board meeting, I’m not so sure.”
Mr Koch said he believed the RBA board will take into account:
- higher prices from the war in Iran are not caused by Australians spending too much but by unforeseen circumstances beyond our control
- it’s uncertain how long the war will last, and the RBA may want to wait for more clarity. You don’t want to plunge the economy into recession by overreacting
- higher petrol prices will siphon money out of household budgets to a similar extent as a rate rise. Doing both together could break the economy and consumers.
“If we are spared a hike next week, we’ll almost certainly see one in May, and potentially another later in the year depending on what happens.”
Someone with an average loan of $730,000 would see their repayments increase by around $116 a month or $1,392 a year with a single 0.25% interest rate increase.
Impact of a potential rate rise on Australian mortgage repayments
| Loan size | Monthly impact of a 0.25% rate increase | Monthly impact of x2 0.25% rate increases (0.50%) | Monthly impact of x3 0.25% rate increases (0.75%) | Monthly impact of x4 0.25% rate increases (1%) |
| $500,000 | $79 | $158 | $239 | $320 |
| $600,000 | $94 | $190 | $287 | $384 |
| $750,000 | $118 | $237 | $358 | $480 |
| $900,000 | $142 | $285 | $430 | $577 |
| $1,000,000 | $157 | $317 | $478 | $641 |
| *Calculations assume an owner-occupied loan with a variable interest rate of 5.42% that is increased by 0.25% a month. It assumes a 30-year loan term, with no ongoing fees. This does not take into account the reduction of the loan balance over time. | ||||
“It’s a huge hit to the household budget – especially when we’re being stung at the petrol bowser, facing higher prices at the grocery store and scrambling to keep up with the rising costs that are hitting us from every direction,” Mr Koch said.
Kochie’s warning comes as 39% of Australian homeowners surveyed by Compare the Market in March said they didn’t even know their current interest rate.**
Aussie homeowners also said that to make extra repayments in the event of more interest rate rises, they’d have to:
- Dip into savings: 15%
- Spend less on clothing and accessories: 22%
- Reduce spend on eating out and takeaway meals: 21%
- Sacrifice social activities: 19%
- Delay big-ticket purchases: 16%
“Making small adjustments is a smart move as we face uncertainty around interest rates in 2026,” Mr Koch said. “With hikes on the cards, it’s a good idea to familiarise yourself with your current interest rate so you know if you’re on a good deal or if you’d benefit from refinancing or switching to a lower rate.
“If you haven’t already, talk to your lender about ways to shield yourself from potential rate rises. It could be utilising an offset account, making extra repayments to build a buffer, changing to fortnightly repayments or even refinancing so you’re on a competitive interest rate.
“We’re likely in for a bumpy 2026, so anything you can do to minimise the impacts now could set you up for a smoother ride throughout the year.”
**Compare the Market survey of 1,015 Australian adults, conducted March 2026.
For more information, please contact:
Phillip Portman | 0437 384 471 | [email protected]
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