Market Expectations for Rates in 2026

The RBA remains data-dependent, with no preset path, but signals suggest caution. Market pricing (via ASX 30-day cash rate futures) assigns only a low probability (~13–27% as of early March) to a hike at the next meeting on 17 March, with expectations leaning toward stability short-term. However, major bank economists (ANZ, CBA, NAB, Westpac) largely anticipate at least one more 25 basis point rise—potentially in May—pushing the cash rate toward 4.10% if inflation data disappoints or labour market tightness persists.
This “higher for longer” outlook means variable rates could face further upward pressure in the coming months, adding modest but noticeable costs (e.g., ~$130–$150 extra per month on an $800,000 loan for a 0.25% increase).

Pros and Cons of Fixing Now

Advantages of fixing:

• Certainty in uncertain times — Locking in shields against potential further hikes, providing predictable repayments amid inflation risks and a resilient economy.
• Protection from near-term rises — If economists’ May hike forecasts materialise, a fixed rate secured now could prove cheaper than staying variable over the term.
• Budget stability — Especially valuable for families or those in high-cost areas like Southern and South Western Sydney, where affordability is already stretched.

Disadvantages and risks:

• Opportunity cost if rates stabilise or fall — Fixed rates currently carry a premium over many variables; if inflation eases faster than expected or global factors prompt earlier easing, you’d miss out on lower repayments.
• Break costs and inflexibility — Exiting early (e.g., to refinance if rates drop) often incurs significant penalties.
• Higher entry point — With fixed rates elevated from late-2025 lows, you’re locking in above some historical averages, potentially overpaying if the cycle turns sooner.

Is It a Good Time?

It depends on your circumstances:

• If you prioritise peace of mind and can tolerate the current fixed premium for protection against another hike or two, fixing (or splitting your loan—e.g., 50% fixed, 50% variable) makes sense right now. Shorter terms (1–2 years) offer a balance: capture stability without committing too long.
• If you’re comfortable with variability and believe inflation will moderate (or you have buffers like offset accounts/extra repayments), staying variable—or waiting—could pay off, especially with low near-term hike odds for March.

No one can predict the RBA perfectly, but the current tilt toward modest further tightening (per big banks and some market signals) leans toward fixing providing more insurance than regret in the short-to-medium term. Review your specific loan, equity, and cash flow—perhaps with a First State Home Loans health check—to decide what aligns best with your risk tolerance.