Rate Rise FAQs: Your Questions About 2026 Interest Rate Increases Answered

Published: January 25, 2026
Reading Time: 8 minutes
Location Focus: Wollongong, NSW

Everything You Need to Know About Rising Interest Rates

With the RBA expected to raise interest rates in February 2026, Wollongong borrowers have many questions about what this means for their mortgages and finances. We've compiled the most common questions and provided comprehensive answers.

Q1: When Will Rates Rise?

A: The RBA is expected to raise the cash rate by 0.25% at its February 3, 2026 meeting, bringing the rate from 3.60% to 3.85%. However, this is a forecast, not a guarantee. The RBA could hold rates steady, raise by a different amount, or even cut rates if economic conditions change.

Most economists expect additional rate increases throughout 2026, with forecasts suggesting the cash rate could reach 4.10% or higher by year-end. However, these forecasts are subject to change based on inflation, employment, and other economic factors.

Q2: How Will a Rate Rise Affect My Mortgage?

A: The impact depends on your loan type. If you're on a variable rate mortgage, your interest rate will increase, and your monthly repayment will rise. A 0.25% increase on a $400,000 mortgage means approximately $100 more per month.

If you're on a fixed rate mortgage, your repayment won't change until your fixed rate period ends. However, when it does end, you'll likely face a higher rate than you currently have.

If you have a split loan with both fixed and variable portions, only the variable portion will be affected by the rate rise.

Q3: How Much Will My Repayment Increase?

A: The increase depends on your loan amount and the size of the rate rise. As a rough guide, each 0.25% rate increase adds approximately $25 per month to repayments on a $400,000 mortgage.

To calculate your specific increase, multiply your loan balance by the rate increase (as a decimal) and divide by 12. For example, a $500,000 mortgage with a 0.25% rate increase would see monthly repayments increase by approximately $104.

A mortgage broker can calculate your exact increase based on your specific loan details.

Q4: Should I Lock in a Fixed Rate Before Rates Rise?

A: This depends on your financial situation and risk tolerance. Fixed rates offer certainty about your repayments, which is valuable if you're already stretched financially or if you have limited capacity to absorb higher repayments.

However, fixed rates are typically slightly higher than current variable rates, and you'll lose flexibility if you need to access your loan features. A mortgage broker can help you analyze whether fixing your rate makes sense for your situation.

Q5: What If I Can't Afford Higher Repayments?

A: If stress-testing your mortgage reveals you can't afford higher repayments, you have several options. You could lock in a fixed rate to protect against further increases. You could restructure your loan to extend your loan term, reducing monthly repayments (though this increases total interest paid).

You could also consider refinancing to a lower rate with a different lender, which might offset the impact of rate rises. A mortgage broker can help you explore these options.

Q6: Will Rate Rises Affect Property Prices?

A: Rate rises typically slow property price growth rather than causing price declines. When borrowing becomes more expensive, some buyers reduce their maximum purchase price or delay their purchase. This reduces demand and slows price growth.

However, other factors also affect property prices, including supply, population growth, and economic conditions. In Wollongong, strong population growth and limited supply suggest prices will likely continue to grow in 2026, albeit at a slower pace than recent years.

Q7: Is Now a Good Time to Buy?

A: Whether now is a good time to buy depends on your personal circumstances, not just interest rates. If you're ready to purchase, have saved a deposit, and have found a property you like, now is as good a time as any.

Trying to time the market is difficult and often leads to missed opportunities. Rather than waiting for perfect conditions, focus on finding the right property for your needs and ensuring you can comfortably afford the repayments.

Q8: Should I Make Extra Repayments Before Rates Rise?

A: If you have extra money available, making extra repayments before rates rise can reduce your loan balance and interest costs. This also builds a buffer in your offset account, giving you flexibility if your repayments increase.

However, ensure you're not overextending yourself. You should maintain an emergency fund of 3-6 months of expenses before making extra mortgage repayments.

Q9: How Can a Broker Help Me Prepare for Rate Rises?

A: A mortgage broker can help you prepare for rate rises in several ways. They can stress-test your mortgage to show you how higher rates would affect your repayments. They can help you explore options like fixing your rate, restructuring your loan, or refinancing to a better rate.

They can also help you understand your financial capacity to handle rate increases and recommend strategies to prepare. Brokers have access to multiple lenders, so they can help you find the best available rates and terms.

Q10: What If Rates Fall Instead of Rising?

A: While most forecasts predict rate rises, it's possible rates could fall if economic conditions change. If you lock in a fixed rate and rates subsequently fall, you'll be locked into a higher rate and will have missed the opportunity for lower rates.

However, if you remain on a variable rate and rates fall, you'll benefit from lower repayments. The trade-off is that you're exposed to the risk of rates rising higher than expected.

Q11: How Often Will Rates Rise?

A: The RBA typically meets every month to decide on interest rates. However, it doesn't raise rates at every meeting. The RBA might raise rates at some meetings, hold rates steady at others, and potentially cut rates at future meetings.

Most economists expect the RBA to raise rates in February 2026, but subsequent rate decisions will depend on inflation, employment, and other economic factors.

Q12: Should I Refinance Before Rates Rise?

A: If you're currently on a higher rate than new customers are receiving, refinancing before rates rise makes sense. By refinancing now, you lock in a better rate before rates rise further.

A mortgage broker can calculate your break-even point and show you exactly how much you'll save by refinancing. In many cases, the savings justify any refinancing costs.

Taking Action

If you're concerned about rising interest rates, don't wait. The window before February's expected rate increase is narrow. By acting now, you can lock in better rates, restructure your loan, or prepare your finances for higher repayments.

Contact a mortgage broker today to discuss your options. A broker can stress-test your mortgage, help you explore your options, and recommend strategies to prepare for rate rises.

The Bottom Line

Interest rate rises are expected in 2026, but they don't have to catch you unprepared. By understanding how rate rises affect your mortgage, stress-testing your finances, and exploring your options with a mortgage broker, you can prepare effectively and ensure you're positioned well for whatever interest rate environment 2026 brings.

Ready to prepare for rate rises? Call Frontier Finance at 0413 798 731. Our brokers will help you stress-test your mortgage and recommend strategies to prepare for rising rates.

Disclaimer: This article provides general information about interest rate rises and their potential impact. 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 how rising interest rates might affect your specific circumstances.