A hot inflation result has put a rate rise back on the table for Melbourne Cup Day

On Wednesday the Australian Bureau of Statistics released the inflation figures for September, and they came in higher than almost anyone expected. For anyone with a variable rate home loan, the timing matters. The Reserve Bank board meets on Monday and Tuesday next week, with its decision due on the Tuesday afternoon, which this year also happens to be Melbourne Cup Day. A result like this one makes that meeting far more consequential than it looked even a few days ago.

What the figures actually show

Annual inflation rose to 4.3 percent in the year to September, up from 4.0 percent in August. The monthly rise was 0.8 percent, roughly double August's 0.4 percent, and prices for the September quarter overall rose 1.3 percent. The number the Reserve Bank watches most closely, the trimmed mean that strips out the most volatile price swings, rose to 3.6 percent for the year, with the quarterly trimmed mean coming in at 1.0 percent against the bank's own forecast of 0.8 percent. In plain terms, underlying inflation did not just hold steady, it picked up, and it picked up by more than the Reserve Bank itself had pencilled in.

Housing was the biggest driver, up 5.2 percent over the year, with new dwelling costs and electricity both contributing. Transport was the next largest factor, up 8.7 percent annually as fuel prices jumped 9.4 percent in September alone. None of that is within a household's control, which is exactly why these figures matter so much for interest rate expectations.

Why this pushes the odds of a rise higher

Before Wednesday's release, financial markets were pricing in roughly a 60 percent chance of a rate rise at next week's meeting. By the end of the day, that had moved to around 90 percent. All four major banks now expect the Reserve Bank to lift the cash rate by 0.25 percentage points to 4.85 percent, which would be its fifth rise this year and its highest level since the global financial crisis.

The language from the banks' own economists has shifted too. CBA's Belinda Allen described a November move as an “insurance hike,” having earlier expected the bank to hold. ANZ's economists said the data “cements the case” for a rise. Westpac's chief economist Luci Ellis still expects a hike next week, though she does not see it as the start of a longer run, saying further rises beyond next week are not currently Westpac's base case. KPMG's Brendan Rynne went further, calling the figures the last piece of evidence the Reserve Bank needed, and suggested that even if the board holds next week, another rise early in 2027 looks more likely than not.

What it would mean for your repayments

If the Reserve Bank does lift the cash rate by 0.25 percentage points, lenders typically pass that rise on in full within a week or two. Modelling from comparison site Canstar puts the extra monthly cost at around 77 dollars on a 500,000 dollar loan, 92 dollars on 600,000 dollars, 123 dollars on 800,000 dollars, and 153 dollars on a 1,000,000 dollar loan, assuming a standard variable rate and the full rise is passed through. That would be the fifth increase this year, so for many borrowers it adds to a cumulative rise that is already being felt.

It is also worth remembering how lenders assess new borrowing in this environment. Every lender is required to test whether you could still afford your repayments at an interest rate three percentage points above the one you would actually pay. That buffer, set by the banking regulator APRA, is designed to give households some breathing room for exactly this kind of rate movement, and it remains in place regardless of what happens next week.

What to do before Tuesday

A single rate decision rarely changes someone's financial position overnight, but it is a sensible prompt to check where you actually stand. If you are on a variable rate, it is worth working out what another 0.25 percentage point rise would do to your repayments before it happens rather than after. If you have not reviewed your loan in a while, now is also a reasonable time to ask whether your current rate still reflects what is available elsewhere, particularly if your circumstances or the value of your home have changed since you took the loan out.

We will not know the outcome until Tuesday afternoon, and even a confident market is not a certainty. Whatever the board decides, if you want a clear picture of what it means for your own loan, or simply want a second opinion on your current rate, talk to us before you assume anything about what next week will bring.

Figures note: inflation figures are from the Australian Bureau of Statistics, Consumer Price Index release for September 2026, published 28 October 2026. Market pricing and bank forecasts are as reported by ABC News on 28 October 2026. Repayment modelling is from Canstar, also published 28 October 2026. The APRA serviceability buffer figure is confirmed current as of the regulator's most recent statement, reconfirmed 28 October 2026.

This article is general information only and does not take into account your personal objectives, financial situation or needs. Please speak with a Claremont Financial broker before making any borrowing decision.