Inflation Rises to 3.8% - CommBank Predicts February Rate Hike

In the latest news in Sydney's financial landscape, inflation has climbed to 3.8% and CommBank economists are now forecasting a rate hike at the RBA's February meeting. Here's what this means for Sydney property buyers and homeowners.

Inflation Jumps Above Expectations

The Australian Bureau of Statistics has released December's Consumer Price Index (CPI) data, showing inflation rose to 3.8% - up from 3.4% in November and well above the RBA's target range of 2-3%.

The biggest contributors to inflation were:

• Housing costs: Up 5.5% - affecting Sydney renters and buyers alike
• Recreation and culture: Up 4.4%
• Food and beverages: Up 3.4%

CommBank Forecasts February Rate Rise

CommBank economists have stated that "faster growth and stubborn price pressures mean a small rate rise may be coming early in the new year." This aligns with their prediction of a 0.25% increase at the February 3rd RBA meeting.

Following the inflation data release, traders pushed the odds of a February rate hike to 72%, up from 63% before the CPI announcement.

Australian Dollar Strengthens on Rate Expectations

The Australian dollar has responded positively to the inflation data and rate hike expectations. The AUD is currently trading around $0.69 USD, near a 16-month high.

CommBank analysts are tipping the Australian dollar could reach up to $0.73 USD in 2026 if rates rise as expected. A stronger Australian dollar can help reduce import costs, potentially easing some inflationary pressures over time.

Latest News in Sydney Property Market

Despite rate rise concerns, Sydney's property market remains resilient. According to the latest CoreLogic data:

Sydney's upper quartile suburbs - including Bellevue Hill, Vaucluse, and Rose Bay - have been leading the charge, reflecting continued demand in premium markets.

What This Means for Sydney Home Buyers

If you're looking to buy property in Sydney, here's how to navigate these conditions:

1. Get Pre-Approved Now

Your borrowing power is calculated using current rates. If rates rise, your borrowing capacity could decrease by approximately $12,000 for each 0.25% increase. Getting pre-approved before February 3rd locks in your current borrowing power.

2. Budget for Higher Repayments

If you're taking out a new loan, ensure you can handle potential rate rises. On a $600,000 loan, a 0.25% increase adds approximately $90 per month to your repayments.

3. Consider Your Timing

With Sydney prices forecast to reach $1.92 million by year-end, waiting could mean paying more for the same property. However, rushing into a purchase you can't afford is never wise.

What This Means for Sydney Homeowners

If you already have a mortgage:

Review Your Current Rate

Many Sydney homeowners are paying more than they need to. The average variable rate is 6.46%, but the lowest rates available are around 5.84%. Refinancing to a lower rate could offset any RBA increase.

Consider Fixing

CommBank's lowest 2-year fixed rate is currently 5.79%. If you value certainty, fixing some or all of your loan could protect you from further increases.

Build a Buffer

If you have an offset account, try to build up a buffer. Even a few months of repayments saved provides peace of mind if rates continue to rise.