Interest rate cut hopes crushed as three of the biggest banks reverse forecasts

RBA Governor Michele Bullock is expected to annoucne a rates hold in December. Picture: NewsWire / Nikki Short

Australian homeowners have been dealt a brutal blow, with three of the nation’s biggest banks now unequivocally ruling out any further RBA cash rate cuts in this cycle.

ANZ has dramatically reversed its forecast, joining Commonwealth Bank and National Australia Bank in predicting the cash rate will remain on hold throughout 2026, effectively shattering borrower dreams of cheaper repayments and raising the spectre of potential rate hikes.

Westpac now remains the only major bank, expecting two further cuts in May and August next year.

With inflation moving in the wrong direction and unemployment falling back to 4.3 per cent, Canstar data insights director, Sally Tindall said there was no case for a further rate cut in the near term.

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She said the RBA would almost certainly keep rates on hold when it meets next week on December 8 and 9.

“While the RBA is unlikely to start hiking rates without plenty of notice, if inflation continues to move in the wrong direction, the next move from the central bank could be up rather than down,” she said.

“Certainly, if term deposit rates are the canary in the coal mine, then further cash rate cuts are unlikely.”

Source: Canstar.com.au.

Are borrowers prepared for rates to remain on hold?

Canstar’s Consumer Pulse Report, released this week, found that 66 per cent of borrowers are prepared for rates to remain on hold in 2026, with 34 per cent either not prepared or not sure.

It means that borrowers seeking rate relief should be on the lookout for a competitive rate.

Rate tracking from Canstar shows, while some banks are now hiking fixed rates, the lowest fixed rate remains steady at 4.64 per cent, while the lowest variable rate is 4.99 per cent.

Source: Canstar.com.au.

Term deposit rates continue to rise on the back of changing forecasts

Term deposit rates, often a window into the predicted future of the cash rate, have continued to rise on the back of growing consensus we could already be at the bottom of the cycle.

Data tracking by Canstar.com.au shows 34 banks increased at least one term deposit rate in the month of November, up from just six in July of this year.

“Variable borrowers staring down the barrel of no more cash rate cuts should know they can still take matters into their own hands, whether that’s refinancing to a more competitive lender or haggling with their existing bank,” Ms Tindall said.

Canstar data insights director, Sally Tindall. Picture: Tim Hunter.

“For those savers looking to lock in a term deposit rate, make sure you shop around to find a competitive deal but also know rates could potentially rise even higher in the months ahead, although there’s certainly no guarantee of this.

“Laddering can be one way to keep your options open, locking in smaller pots of money at different times. While the strategy isn’t for everyone, it can potentially provide savers with greater flexibility and the ability to capitalise on more competitive rates down the track, should they materialise.

“At the end of the day, if you’re not sure what approach to take, particularly when the future of the cash rate is so highly uncertain, seek out some financial advice and do your research. This will help you make an informed decision that’s a good fit for your own financial situation.”

The RBA will be “The Grinch that Stole Christmas” this year

Aussie finance experts have also weighed in on future cash rate moves in this month’s Finder RBA Cash Rate Survey.

All 35 panellists surveyed expect the RBA to hold the cash rate on Tuesday, keeping it at 3.60 per cent.

Almost all experts (33/35) said the RBA should hold the cash rate next week, while just 6 per cent (2/35) believe the Bank should deliver a final hike to close out 2025.

Graham Cooke, head of consumer research at Finder, said Australia’s economists are sending a clear message: don’t expect rate relief anytime soon.

“A hold is still a better outcome than an end-of-year hike, which was being suggested by some analysts – and would have added extra pressure to already stretched household budgets,” he said.

“With inflation starting to get away from the RBA, the board appears committed to steady rates for now.

“Any festive rate cuts are firmly off the table, and borrowers will need to prepare for a cautious start to 2026 rather than a sudden reprieve.”

Source: Finder

As for what’s in store for the next 12 months, economists appear to be evenly split.

Half of experts who weighed in believe rates have hit the bottom of this easing cycle, while the other half said there was still room for rates to fall.

There is also uncertainty over October’s CPI reading of 3.8 per cent, and whether this will impact the likelihood of a rate hike in the next six months.

More than a third of experts said October’s inflation data had “definitely” raised the likelihood of a rate hike within the next six months, while 34 per cent of experts surveyed saw it having little impact.

A further 28 per cent believe the CPI increased the chance of a hike by as much as 50 per cent.

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