It's a signal of change ahead...
As you would know, fixed rate loans lock your interest for a set term (1, 2, 3, 4 or 5 years), so lenders have to price in the cost of wholesale funding and future RBA moves at the time you sign.
If lenders think inflation or economic growth will push the cash rate higher later in the year, they lift fixed rates now to protect their margins.
In recent months, over 50 lenders have increased fixed rates, with some of the big banks lifting 3 year fixed products by up to 0.7 percentage points.
That’s why you’ll see fewer low ’5s’ on fixed rates and more loans starting in the higher ‘5s or 6s’. The market is effectively repricing risk.
In effect, when fixed rates rise, and the cash rate hasn’t moved yet, the banks are buying insurance against future increases.
A quick look at history
Historical charts of Australian mortgage rates show a clear pattern. Fixed rates tend to rise in the months before or alongside cash rate tightening cycles.
From the early 1990s through the 2000s, fixed and variable rates climbed together when the RBA was in ‘hiking mode’, then drifted down when inflation cooled.
In the 2022-2023 cycle, fixed rates jumped sharply as the RBA began lifting from near zero and many borrowers who fixed early locked in cheaper deals than those who waited.
If we explore a 3 year fixed rate chart versus the cash rate over the last 20-30 years, you’ll find that fixed rate ‘bumps’ usually precede or coincide with the start of a tightening phase, not the end of one.
What rising fixed rates mean for you
For borrowers, rising fixed rates are a warning signal, not just a price tag change.
What are your options?
Lock in risk vs flexibility
Fixing now may cost more than it did six months ago, however it can protect you from further hikes if the RBA does move.
Variable rate borrowers
If you’re on a variable loan and think you might want to fix later, higher fixed rates today mean future fixing will likely be more expensive, assuming the outlook doesn’t soften.
Split loan strategy
Many borrowers now split between variable and fixed (for example, 50/50 or 70/30) to hedge both directions. This way you keep some flexibility while locking in part of your rate.
From a planning perspective, rising fixed rates are the markets way of saying “don’t assume rates will stay low forever”, even if the RBA hasn’t moved yet.
Interest rate outlook for 2026
As we headed into the RBA’s meeting this month, the cash rate was still sitting at 3.6%, on hold since late 2025.
At the beginning of January, most economists expected the RBA to hold steady, however, the closer we headed towards the February announcement and as we saw fixed rates moving, the sentiment changed.
When the RBA lifts, variable rates typically follow, while fixed rates may have already backed much of that move into their current pricing.
In plain English: we’re in a ‘higher for longer’ phase, with the door open to further hikes if inflation doesn’t behave.
How to position yourself now
If fixed rates are moving up, it’s a good time to review, NOT panic.
Check your buffer
Run a ‘stress test’ on your loan at +0.5 – 1.0% to see how your budget copes.
Consider fixing or splitting
If you’re risk-averse or living close to the edge, locking part of your loan at today’s (higher) fixed rates may still be smarter than waiting for it to climb further.
With lenders repricing so quickly, our brokering services can compare multiple lenders and structures to find a range of suitable options for your cash flow and risk tolerance. Reach out anytime.
Disclaimer: This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.
