18 Dec RBA on Hold – What Next for Interest Rates and the Property Market?

RBA on Hold – What Next for Interest Rates and the Property Market?

The Reserve Bank of Australia (RBA) has once again kept interest rates on hold, but the message coming out of the latest meeting was far from relaxed. While rates haven’t moved, the RBA’s tone remains decidedly hawkish, signalling that the fight against inflation isn’t over yet.

So what does this mean for borrowers, investors, and the property market as we head into 2026?

Why the RBA Is Holding (For Now)

The RBA is walking a fine line.

On one hand, inflation has eased from its peak and economic growth is slowing. Household budgets are under pressure, consumer spending has softened, and higher interest rates are clearly doing their job.

On the other hand, inflation is still above the RBA’s target range, the labour market remains relatively tight, and services inflation has proven stubborn. This explains the RBA’s “hawkish hold” – rates are unchanged, but the door is still open to further increases if inflation reaccelerates.

In simple terms:

“The RBA is waiting for more evidence that inflation is truly under control before declaring victory.”

Could Rates Rise Again in 2026?

Looking ahead to 2026, the outlook becomes more nuanced.

Most economists expect slower economic growth in 2026, driven by:

• The cumulative impact of higher interest rates
• Softer consumer spending
• A cooling labour market

Under this scenario, the risk of further rate hikes diminishes. However, the key wildcard remains inflation.

If inflation proves sticky – particularly in areas like rents, insurance and services – the RBA may feel compelled to keep rates higher for longer, or even raise them again. This would likely be more about defensive policy rather than optimism about the economy.

What This Means for the Property Market

The property market is already reflecting a “higher-for-longer” rate environment.

Owner-occupiers

• Borrowing capacity has been significantly reduced compared to a few years ago
• Many households are prioritising stability and cash flow over upgrading
• Any further rate increases would add pressure, particularly for recent buyers

Investors

• Rental demand remains strong, supporting rental yields
• Higher interest costs continue to squeeze cash flow, making property selection critical
• Tax effectiveness and long-term fundamentals matter more than short-term price gains

Prices
Rather than a broad-based boom or bust, the more likely outcome is:

• Modest price growth in supply-constrained areas
• Flat or uneven outcomes across different regions
• Greater sensitivity to interest rate movements than we’ve seen in the past decade

What Should Borrowers and Investors Be Thinking About?

Periods like this are less about trying to predict the next RBA move and more about building resilience into your financial strategy.

That might mean:

• Stress-testing your loan repayments at higher rates
• Reviewing fixed vs variable loan structures
• Ensuring investment decisions stack up even if rates stay elevated
• Avoiding over-reliance on property alone for long-term wealth creation

The Bottom Line

The RBA may be on hold today, but it hasn’t declared the inflation battle over. As we look toward 2026, slower growth is likely, which should limit how much further rates rise. However, the path forward won’t be smooth, and interest rates are unlikely to fall quickly.

For property owners and investors, this environment rewards discipline, diversification and careful planning, rather than speculation.

As always, the right strategy depends on your personal circumstances, cash flow and long-term goals – not just where the RBA sets rates next month.

Important information and disclaimer

The information provided in this document is general information only and does not constitute personal advice. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. From time to time we may send you informative updates and details of the range of services we can provide.

FinPeak Advisers ABN 20 412 206 738 is a Corporate Authorised Representative No. 1249766 of Spark Advisers Australia Pty Ltd ABN 34 122 486 935 AFSL No. 458254 (a subsidiary of Spark FG ABN 15 621 553 786)