Brokers react to renewed spectre of rate hikes

The consumer price index (CPI) rose 3.8 per cent in the 12 months to December 2025, up from 3.4 per cent in the year to November, according to the Australian Bureau of Statistics.

For the December quarter, inflation printed at 3.6 per cent – the highest level in six quarters.

The trimmed mean – a key measure for the Reserve Bank of Australia (RBA) as it removes the most volatile price movements – rose to 3.3 per cent in the 12 months to December, from 3.2 per cent in the year to November.

The RBA’s inflation target range is 2–3 per cent.

Prior to the data release, the big four banks were split on the likelihood of a February cash rate hike.

Following the figures, however, Australia and New Zealand Banking Group (ANZ) and Westpac have joined Commonwealth Bank (CBA) and National Australia Bank (NAB) in forecasting a 25-basis point hike at the RBA’s upcoming meeting on 3 February.

Broker role more important than ever

For Melanie Smith, broker and Aussie franchisee, the inflation figures were “not a huge surprise.”

“While disappointing, it’s really a sign of the uncertain times,” Smith told Broker Daily, who said that she has already been working out servicing as if rates were going up.

“From a broker’s perspective, it keeps conversations focused on strategy for cash flow.

“I also think it highlights the importance of good advice from trusted experts like brokers. For brokers, it highlights the need to spend more time with clients, getting to know them and not just their numbers.

“I think brokers can provide clarity and reassurance more than ever. We can help clients understand their overall position and their options.

“We can do the stress testing before the stress actually arrives.”

Graeme Salt, mortgage broker and director of Origin Finance, tempered interest rate concerns by noting that a rate rise would have a modest impact on most borrowers.

“Let’s get this in perspective,” Salt said.

“If you have a loan of $500,000 now at 5.25 per cent, a rate rise to 5.5 per cent, will increase your monthly repayments from $2,761 to $2,838.

“And, if you have extra money stored in redraw or an offset account, there will be a smaller increase in interest payments.”

Salt said a rate rise could also have some positive flow-on effects.

“While repayments may go up with rate rises, they may also put a brake on house prices,” he said.

“Higher rates will thin out the competition when it comes to purchase – many would-be buyers will become more cautious when it comes to buying a place.”

However, Salt warned that brokers would need to guide clients carefully through a potentially more challenging approval environment.

He said: “A rate rise will reduce your client’s borrowing capacity. So, if they don’t find a property in those 90 days, when they come to extend pre-approval, chances are the bank will lend less than previously.

“And a few years ago, some banks decided not to honour the pre-approved lending amounts (even during the 90-day period). Brokers will have their ear to the ground as to how each individual bank responds to an RBA rate rise.”

Chris Dodson, director and principal at Mortgages Plus, said any future rate increases would be felt across the mortgage market, but would not alter brokers’ core role.

Speaking to Broker Daily, Dodson said: “Yes, inflation rates aren’t ideal and remain well above the RBA’s 2–3 per cent target. But the strengthening AUD is providing some welcome relief by easing imported inflation pressures and taking a bit of the heat off the RBA.

“However, interest rates do matter, of course, but our focus as brokers remains on ensuring all lending is safe, secure, and sustainable.

“Rather than obsessing over rate movements, we prioritise our clients’ best interests by building strong buffers so you’re well protected against any rainy days that inevitably come.

“That approach allows clients to plan with confidence and focus on living their lives, and at the end of the day, that’s what it’s all about.”

The RBA will meet for the next cash rate decision on 3 February.

[Related: Housing outlook for 2026 remains bullish]