Commonwealth Bank of Australia (CBA) has increased its fixed rates, another sign that national benchmark interest rates might be rising in the near term.
The major bank has increased its three-year fixed mortgage rate to 6.04%, up from the previous rate of 5.34%, starting 15 January, CBA confirmed. The comparison rate inched up from 7.13% to 7.33%. That equals upwards of $200 a month on mortgage repayments.
"In response to broader funding and market conditions, we are updating our advertised fixed home loan rates for new lending," a CBA spokesperson told Australian Broker. "As Australia's largest lender, we offer a range of home loan options designed to meet the diverse needs of our customers. Our teams are ready to help customers understand their options and choose the home loan solution that best suits their needs."
According to CBA's 2025 financial year annual results, fixed-rate home loans represented just about 1% of new business.
But the move signals the lender is bracing for higher borrowing costs as the Reserve Bank of Australia (RBA) works to keep inflation at bay.
While inflation eased slightly in the latest monthly consumer price index (CPI) reading — headline CPI rose 3.4% in the year leading up to November, down from 3.8% in October, with trimmed mean inflation rose 3.2% during the same time period, down from 3.3% the month before — most market participants do not expect the central bank to lower rates at its February meeting. In fact, some, including CBA, expect rates to go up.
"We think the [RBA] will adjust interest rates a little higher, by 25 basis points in February, and just kind of hold from there," Ashwin Clarke, senior economist at Commonwealth Bank of Australia (CBA) told Australian Broker.
The RBA slashed rates three times in 2025 — in February, May and August — bridging the official cash rate down to 3.6%. The lower interest rates ignited market momentum and a wave of FOMO among both current mortgage holders hoping to upgrade and would-be homeowners excited about entering the property market. But the central bank hit pause at the two subsequent meetings, pointing to stubborn underlying inflation as the reason for holding steady.
The RBA has remained firm in its commitment to its 2% to 3% inflation target, and has repeatedly signaled that rates will not be reduced until inflation is securely back within that band. As early as last spring, concerns about 2026 interest rate hikes were already spreading among market players and mortgage holders.
"CBA’s move to increase fixed interest rates reflects growing expectations that interest rates may stay higher for longer," said James Green, director and finance broker at Brisbane-based Flint Group. "Fixed rates are priced on future market and funding costs. So when a major bank like CBA lifts them, it often signals concern that inflation remains sticky and that the RBA may need to tighten policy further. While this doesn’t guarantee a cash rate hike, it does suggest banks are preparing for the possibility, rather than expecting near-term cuts."
But not all market players see the CBA’s latest move as a precursor to imminent rate hikes.
"I don't think that it’s necessarily a sign [of increased rates]. It’s just that banks usually try to protect the margins," said George Li, director and principal at Leading Financial Solutions. "For them it's more of a protection play. So even though CBA has moved forward with that forecast, it doesn't mean that it's going to happen. But for me it's more like fifty-fifty [chance of rate hikes in February] at this stage."
The broker added, however, that he expects a single rate hike at some point in 2026, though the timing remains uncertain.
The RBA's next meeting on monetary policy is on 2 and 3 of February.
