Why Inflation Is Cooling, But Your Mortgage Rate Isn't

Wild Finance blog draft · 21 Sept 2026

If you've felt like the "inflation is coming down" headlines don't match what's happening to your repayments, you're not imagining it. The numbers tell an interesting story, and it's worth understanding, because it shapes what happens to your rate next.

The trend really is cooling

Annual inflation peaked at 4.6% in March this year. Since then it's eased steadily: 4.2% in April, 4.0% in May, 3.8% in June, and 3.5% for the year to July. That's a genuine downward trend, not noise.

The catch is the Reserve Bank's target band is 2 to 3%. At 3.5%, we're closer than we were, but not there yet. And "closer" is doing a lot of work in that sentence.

What's actually driving the number

Housing itself is the single biggest contributor to inflation right now, up 5.0% over the year, made up of new dwellings (+5.7%), rents (+3.6%) and electricity (+6.1%). There's a genuine irony in that: the cost of housing is one of the things keeping rates higher for longer, which then makes housing more expensive to finance. It's a loop, not a coincidence.

On top of that, escalating tensions between Iran, Israel and the US disrupted global oil markets earlier this year. Australia imports most of its fuel, so higher oil prices flow straight through to petrol, and petrol touches almost everything else, because you need it to move goods and deliver services.

That conflict hasn't gone away, and it's exactly what's got lenders talking. Off the back of the ongoing tension in the Middle East and what it's doing to oil prices, the word coming through from lenders right now is that we could be looking at another rate hike, maybe even two, before Christmas. Nothing's locked in, and the Reserve Bank hasn't confirmed a path. But when that much of the lending market is pricing in the same risk, it's worth planning around rather than hoping it doesn't happen.

Some economists are watching for stagflation risk too: inflation, unemployment and slowing growth all moving the wrong way at once. It's not the base case, but it's the reason the Reserve Bank is being cautious rather than declaring victory.

What this means for your rate

The RBA held the cash rate at 4.35% in August. The next decision lands 29 September, and the experts are split on what happens at that specific meeting: some expect another hold, others think there's room for a move. But the broader lender sentiment heading into Christmas points the same direction as the oil story above: up, not down. Rather than guess the exact meeting, the more useful question is what you do either way.

If you're on a variable rate, a hold in September doesn't mean relief is coming soon. The RBA's own language has leaned toward rates staying higher for longer than people expect. If your fixed rate is coming up for renewal, this is exactly the environment where the gap between what you're paying now and what you'll pay on renewal catches people out. And if you've been waiting for rates to fall before you buy, it's worth running the numbers on what you can actually service today, rather than betting on a rate cut that isn't guaranteed to arrive on your timeline.

None of this is a prediction dressed up as advice. It's the context. What actually makes sense for you depends on your situation, which is the conversation worth having before the next decision, not after it.

This is general information, not personal financial advice. Get in touch and we'll look at your actual numbers.