5 Smart Money Moves Before Interest Rates Rise in February
Published: January 16, 2026
Reading Time: 6 minutes
Location Focus: National
The Rate Rise Is Coming
The Reserve Bank of Australia is expected to increase the cash rate by 0.25% in February 2026, bringing it from 3.60% to 3.85%. While a quarter-point increase might seem modest, it translates to real money in your mortgage payments. For a $400,000 mortgage, a 0.25% rate increase means approximately $100 more per month in repayments.
If you're a borrower with a variable rate mortgage or someone considering refinancing, now is the time to take action. Here are five smart financial moves to make before rates rise.
1. Lock in a Fixed Rate Before the Rise
If you're currently on a variable rate or considering refinancing, locking in a fixed rate before February gives you certainty about your repayments for the fixed term. Fixed rates are typically set based on market expectations of future rate movements. Once rates rise, fixed rates will likely increase as well, making current rates more attractive than future rates.
A mortgage broker can compare fixed rate options across 40+ lenders, finding the best rate and terms for your situation. They'll explain the trade-offs between fixed and variable rates, helping you choose the structure that suits your financial goals and risk tolerance.
2. Make an Extra Lump Sum Payment Now
If you have savings available, making a lump sum payment toward your mortgage principal before rates rise has two benefits. First, you reduce the amount of interest you'll pay over the life of your loan. Second, you build a buffer in your offset account (if you have one), giving you flexibility if your repayments increase after the rate rise.
Many lenders allow annual lump sum payments without penalty. Check your loan documents or ask your broker about your specific allowances. Even a $2,000 to $5,000 lump sum payment now can save thousands in interest over your loan's life.
3. Refinance to a Better Rate
If you've been with your current lender for several years, you might be paying a higher rate than new customers receive. Refinancing to a more competitive lender can reduce your repayments immediately. A mortgage broker can compare rates across multiple lenders and calculate your break-even point, showing you exactly how much you'll save by switching.
The refinancing process typically takes 2-3 weeks, so acting now ensures you're locked into a better rate before February's potential increase. Brokers handle all the paperwork and lender communication, making the process straightforward and stress-free.
4. Increase Your Repayment Frequency
Changing your repayment frequency from monthly to fortnightly can reduce the interest you pay significantly. This works because you're making 26 fortnightly payments per year instead of 12 monthly payments, effectively making one extra monthly payment annually. Over a 30-year mortgage, this strategy can save tens of thousands in interest.
The best part is that this change costs nothing and requires just a conversation with your lender or broker. If you're paid fortnightly, aligning your mortgage repayments with your pay cycle also improves cash flow management.
5. Review Your Budget and Stress-Test Your Finances
Before rates rise, take time to review your household budget and calculate how a rate increase will affect your financial situation. If you're on a variable rate mortgage, stress-test your budget by calculating your repayments at a higher rate. For example, if rates rise to 4.10% (an additional 0.50% above current levels), what would your new repayment be, and can your budget accommodate it?
This exercise helps you identify areas where you can reduce spending or increase savings to prepare for higher repayments. It also helps you determine whether you should lock in a fixed rate or remain on variable rates based on your financial capacity to handle increases.
Why Acting Now Matters
The window between now and February is narrow. Rate expectations are already priced into current fixed rates, meaning rates will likely increase once the RBA makes its decision. By acting now, you're taking advantage of current market conditions before they shift.
A mortgage broker can help you execute these strategies efficiently. Rather than contacting multiple lenders individually, a broker compares options across their entire panel, saving you time and ensuring you get the best available rates and terms.
Taking Action Today
Don't wait until after the rate rise to take action. The best time to refinance, lock in a fixed rate, or restructure your mortgage is before rates increase. Contact a mortgage broker today to discuss your options and create a strategy tailored to your financial situation.
Whether you're looking to refinance, switch to a fixed rate, or optimize your repayment strategy, a broker can guide you through the process and help you make the most of current market conditions.
Ready to prepare for the February rate rise? Call Frontier Finance at 0413 798 731 today. Our brokers will review your current mortgage and recommend strategies to minimize the impact of rising rates.
Disclaimer: This article provides general information only and should not be considered personal financial advice. Interest rate forecasts are subject to change, and actual rate movements may differ from expectations. Please consult with a qualified mortgage broker or financial advisor to discuss your specific circumstances before making any lending decisions.