Australian mortgage holders have been dealt a significant blow, with one of the nation's largest banks abruptly withdrawing its forecast for imminent interest rate relief. This stark warning signals that homeowners must prepare for high borrowing costs to persist for much longer than previously anticipated.
Bank's U-Turn on Rate Cut Predictions
ANZ Bank has formally scrapped its expectation for a cash rate cut in the first half of 2026, a move that directly impacts millions of borrowers. The bank's head of Australian economics, Adam Boyton, communicated this pivotal shift to customers, stating the official cash rate is now likely to remain at its current level of 3.6 per cent for an 'extended period'.
This reversal follows the Reserve Bank of Australia's (RBA) recent decision to keep the cash rate on hold at 3.6 per cent. The RBA's unanimous verdict last month came despite market hopes for easing, firmly putting the anticipated cutting cycle on pause.
Inflation Data Forces the RBA's Hand
The central bank's cautious stance is a direct response to worrying inflation figures. Headline inflation climbed to 3.8 per cent in the year to October, rising from 3.6 per cent and placing it well above the RBA's target band of 2 to 3 per cent. The trimmed mean measure, a key indicator of underlying price pressures, also increased to 3.3 per cent over the same period.
This persistent inflation has created a complex dilemma for policymakers. Mr Boyton explained that the RBA's dual mandates of price stability and full employment are currently pulling in opposite directions, complicating the path for any future rate moves.
What This Means for Homeowners and the Economy
The immediate consequence is that the prospect of a rate cut has now receded into the distant future, with some analysts even suggesting the next move could be a hike. For households with mortgages, this translates into sustained financial pressure, with no relief on monthly repayments in sight.
Despite the inflationary spike, ANZ believes the RBA is unlikely to hike rates again, forecasting that the recent cost-of-living increases will be temporary. 'With growth around potential, the activity case for further easing is also less clear,' Mr Boyton noted. He added that conflicting economic signals make a strong case for a rate hike in 2026 difficult to justify.
The bank's revised outlook now points to a prolonged holding pattern. The RBA is expected to maintain a neutral stance with a cash rate of 3.60 per cent, which it views as close to a balanced setting for the current economic climate, characterised by a labour market near equilibrium and GDP growth tracking around its potential.
