Will Interest Rates Go Up? What the Latest Inflation Figures Mean for Your Mortgage
Australia's inflation figures for the June 2026 quarter came in softer than expected, easing pressure on the Reserve Bank of Australia to raise the cash rate again in August. Annual inflation slowed to 3.8%, down from 4.0% in May, while the Reserve Bank's preferred measure of underlying inflation, the trimmed mean, held steady at 3.6%. For homeowners, buyers and anyone thinking about refinancing, this is a reassuring sign. It does not guarantee rates will fall, but it does reduce the likelihood of another increase in the near term. Here is what the figures mean, what to watch next and whether now is a good time to review your home loan.
At a glance
Annual inflation eased to 3.8% in the year to June 2026, down from 4.0% in May
Underlying (trimmed mean) inflation held at 3.6%, still above the RBA's 2 to 3% target band
Both measures came in softer than economists and the RBA itself had forecast for the quarter
The cash rate remains at 4.35% after three increases earlier in 2026 and a hold in June
The RBA meets again on 10 and 11 August 2026, and this result makes another hike less likely, though not off the table
If you have not reviewed your home loan in the past 12 months, now is a sensible time to check it is still competitive
What happened to inflation in Australia?
The Australian Bureau of Statistics released the June quarter Consumer Price Index on 29 July 2026. Headline inflation eased to 3.8% over the year, down from 4.0% in May, while the trimmed mean measure, which strips out the largest price swings, held at 3.6%. In the month of June alone, the CPI fell 0.1%.
| Measure | June quarter 2026 result |
|---|---|
| Annual CPI (headline) | 3.8%, down from 4.0% in May |
| Annual trimmed mean (underlying) | 3.6%, unchanged from May |
| Quarterly trimmed mean movement | 0.8% |
| Quarterly CPI movement | 0.6% |
| Monthly CPI movement, June | -0.1% |
Housing was the largest contributor to annual inflation, up 6.8%, driven by electricity prices rising 22.4% after government rebates expired and new dwelling prices climbing 5.8% as builders passed on labour and material costs. Food and non alcoholic beverages and recreation and culture each rose 3.3% over the year, with holiday travel a key driver as more Australians travelled during the northern hemisphere summer. Automotive fuel prices fell 10.9% in June alone, which pulled the headline figure down and is also why fuel has been excluded from the trimmed mean calculation since March 2026.
The result matters because it landed below expectations. Markets and the major banks had pencilled in a stronger quarterly trimmed mean of around 0.9% and an annual figure closer to 3.7%. The RBA's own May forecast had trimmed mean inflation reaching 3.8% by this point. Coming in under both sets of forecasts is what shifted the conversation toward a possible rate hold in August.
Why does inflation matter?
Inflation is simply the rate at which prices rise across the economy. A small amount of inflation is normal and healthy. Too much, for too long, erodes what your income and savings can buy and makes it harder for households to plan ahead. The Reserve Bank's job is to keep inflation within a target band of 2 to 3% over time. When inflation runs above that band, the RBA typically raises the cash rate to slow spending and borrowing, which in turn takes pressure off prices. When inflation is falling back toward target, the case for further rate increases weakens, and eventually the conversation shifts toward when rates might come back down.
Why does the RBA focus on trimmed mean inflation?
Headline inflation can jump around from month to month because of one off events. Fuel prices tied to global oil markets, extreme weather affecting fruit and vegetable supply and temporary government rebates can all push the headline number up or down without reflecting the true state of the economy. The trimmed mean removes the most extreme price movements in either direction and looks at what is left. This gives the RBA a clearer view of persistent, underlying inflation rather than short term noise, which is why the trimmed mean carries more weight in rate decisions than the headline CPI figure.
What do the latest inflation figures mean for interest rates?
The cash rate currently sits at 4.35%, following three increases earlier in 2026 and a decision to hold in June. The RBA's next meeting is scheduled for 10 and 11 August 2026. Economists remain divided on the outcome. A recent Finder survey found that 55% of experts expect at least one further increase before the end of 2026, and of those, most see August as the most likely timing.
This June quarter result changes the calculation. Because both headline and underlying inflation came in softer than the RBA had forecast in May, and softer than the market expected, the case for holding rates in August has strengthened. Several bank economics teams, including TD Securities, now expect the RBA to stay in a pause and observe mode at the August meeting while it waits for further data.
That said, a hold is not guaranteed. Unemployment sits at 4.4%, above the RBA's own forecast for the quarter, and a broader measure of spare capacity in the labour market is at its highest level since 2021. Rents also remain firm, and some economists still expect one more increase later in the year if services inflation proves sticky. The safest conclusion is that another hike is now less likely, not impossible, and borrowers should plan for interest rates staying elevated for some time rather than falling quickly.
What do the latest inflation figures mean for existing homeowners?
If you already have a home loan, these latest inflation figures are encouraging, but they don't automatically mean your repayments will fall. Lenders regularly review their own pricing independently of the RBA, so it's worth checking that your loan is still competitive from time to time. If you'd like to explore the different loan options available, take a look at our Home Loan Services.
• Variable rate: your repayments are not going up on the back of this data. If the RBA holds in August, as now looks more likely, your rate should stay where it is for now.
• Fixed rate: you are protected from any near term movement either way. Use this period to plan for what happens when your fixed term ends.
• Coming off a fixed rate soon: this is the group with the most to think about. Lender pricing on new loans has shifted since you fixed, and it is worth comparing what is available before you roll onto a revert rate.
• Investors: a steadier rate outlook, combined with softer housing cost growth, may support more predictable cash flow planning over the coming months.
What do the latest inflation figures mean for first home buyers?
A more stable interest rate outlook makes it easier to plan your borrowing power with confidence, since lenders assess your ability to repay under current and slightly higher rate scenarios. If the cash rate does hold through August, that assessment becomes a little less likely to tighten further in the near term. If you're planning to buy your first property, it's worth understanding the buying process, the government assistance available and how much you can comfortably borrow before you start house hunting. Our First Home Buyers guide explains everything you need to know before taking that next step.
Is now a good time to refinance your home loan?
This is not about pushing you toward a decision. It is about making sure you are not paying more than you need to.
Lender pricing changes constantly, often independently of the cash rate, so the rate you were offered a year or two ago may no longer be competitive.
Your circumstances may have changed since you took out your loan, including your income, your property value or your goals.
A loan review costs nothing and does not commit you to switching. It simply gives you clarity on where you stand.
If you are coming off a fixed rate in the next few months, comparing your options now gives you more time to make a considered decision rather than a rushed one.
A refinance doesn't always mean changing lenders. Sometimes it's simply about understanding what's available and making sure your current loan is still the right fit.
If it's been more than 12 months since you last reviewed your mortgage, now is a sensible time to do so. Our Refinancing Home Loans guide explains how the process works, when refinancing makes sense and what to consider before making a decision.
““Based on the latest inflation and employment data, the likelihood of another cash rate increase in August appears to have reduced significantly. While the RBA will continue monitoring future inflation data closely, these results suggest the previous rate increases are beginning to have the desired effect.””
Not sure if your home loan is still competitive?
Every borrower is different. Whether you're refinancing, buying your first home or simply want to understand how changing interest rates could affect your mortgage, we're here to help.
Based on the Gold Coast, The Mortgage People help clients across the Gold Coast and Australia compare home loans, refinance with confidence and make informed borrowing decisions.
Book a free, no-obligation home loan review with Martin today.
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While no one can predict future Reserve Bank decisions with certainty, the latest inflation figures have reduced the likelihood of another interest rate increase in the short term. The RBA will continue to monitor inflation, employment and broader economic conditions before making any changes.
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Inflation is one of the key factors the Reserve Bank considers when setting the official cash rate. When inflation remains above the RBA's target range of 2–3%, interest rates may stay higher or increase. As inflation falls, the pressure for higher interest rates generally eases.
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It depends on your individual circumstances. Even if the RBA keeps rates on hold, lenders regularly change their home loan products and pricing. If you haven't reviewed your mortgage in the last 12 months, refinancing could help you secure a more competitive rate or features better suited to your needs.
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The Reserve Bank of Australia aims to keep inflation between 2% and 3% over time. This range is considered consistent with sustainable economic growth and stable employment. Inflation above this target may lead to higher interest rates, while lower inflation can create opportunities for rate cuts.
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If interest rates stay elevated, it's worth reviewing your home loan to ensure you're still on a competitive rate. Speaking with a mortgage broker can help you compare lenders, explore refinancing options and make sure your loan still suits your financial goals.
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It's a good idea to review your home loan at least once every 12 months, or sooner if interest rates change, your fixed-rate period is ending, or your financial circumstances have changed. Regular reviews can help ensure you're not paying more than you need to.