Inflation has taken an unexpected turn, climbing back to the top of the Reserve Bank of Australia’s (RBA) 2–3 per cent target band — a move that’s dimming hopes of a rate cut in November. The latest data shows trimmed mean inflation rising to 3.0 per cent for the September quarter, up from 2.7 per cent in June. It’s the first time inflation has accelerated since late 2022, and that shift is catching the attention of both economists and homeowners alike.
How Rising Inflation Affects Interest Rates
For everyday Australians, this latest jump in inflation isn’t just a number on a chart — it directly influences the cost of living and, more importantly, the direction of interest rates. When inflation rises, it signals to the RBA that the economy might still be running hotter than ideal. As a result, rather than easing interest rates to give borrowers some breathing room, the central bank may decide to hold steady or even wait longer before making any cuts.
The Biggest Price Hikes Driving Inflation
The Australian Bureau of Statistics (ABS) reported that the Consumer Price Index (CPI) rose by 3.2 per cent over the year to September, driven by higher housing, transport, and recreation costs. Electricity prices surged 9 per cent during the quarter, contributing heavily to overall price growth. Annual electricity costs have jumped a staggering 23.6 per cent as several state government rebates have come to an end. Property rates and council levies also saw their largest rise in over a decade, pushing household budgets even further.
What This Means for Homeowners
For homeowners, this means the cost of running a home — from energy to council rates — continues to climb. Even though rental inflation has eased slightly, the broader picture remains challenging for both property owners and those looking to buy. A higher inflation rate often delays relief on mortgage repayments, since rate cuts are less likely when the economy still shows strong price pressures.
Banks Adjust Their Forecasts
The big banks have already adjusted their outlooks in response. The Commonwealth Bank of Australia (CBA) noted that the unexpected strength in trimmed mean inflation makes a rate hold more likely for a “prolonged period.” Westpac and Bendigo Bank have also hinted at pushing back their forecasts for the next rate cut, with some now expecting any movement to come as late as February 2026.
What Borrowers Can Do Now
For borrowers, this means the current higher-rate environment could stick around a little longer than hoped. It’s another reminder of how closely inflation and interest rates are tied — and how shifts in one can ripple quickly through household budgets. While this may feel discouraging, it’s also a good opportunity for homeowners to review their current loan, explore refinancing options, or speak with their broker about strategies to stay ahead of rising costs.
Inflation may be rising, but with the right advice and a proactive approach, homeowners and borrowers can still navigate the challenges and keep their financial goals on track — no matter what direction the next RBA decision takes.
Get in touch with our team today. We’re here to help you explore your options and find the right solution for your financial goals.