Higher for Longer: Why Cheap Mortgage Rates May Be Gone
An independent property analyst argues the era of cheap money is over — planning for rates above 6% may serve borrowers better than waiting for cuts.
There's a question getting more airtime in Australian property circles, and it's worth taking seriously: what if interest rates don't fall much from here, and what if they don't fall for years?
For most of the past decade, borrowers operated with the assumption that the post-GFC era of low rates was the new normal. Then came the hikes. Now the question is whether the rate cuts — widely expected to begin in late 2027 or early 2028 — will take us anywhere close to where we were before.
Michael Matusik, director of independent property advisory Matusik Property Insights, writing in Property Update this week, argues they won't. His analysis lays out three possible paths for the RBA cash rate from here, and his conclusion is blunt: the era of cheap money is over.
Three Scenarios for Australian Rates
The RBA cash rate currently sits at 4.60%, following three increases in 2026. Matusik sees three broad outcomes from here.
**Rates fall.** This is the consensus view. Higher rates slow borrowing, household spending weakens, unemployment edges up, inflation retreats, and the RBA eventually cuts. Matusik doesn't dismiss the logic — but he challenges what it means for borrowers. Even if official rates eventually ease, he argues they're unlikely to return to the sub-3% levels of the pandemic era. "Falling from, say, 5% to 4.5%, or perhaps 4.25%, is very different from returning to 2%," he writes. "Under this scenario mortgage rates could still remain above 6%."
**Rates keep rising.** Today's rates only look high compared with the extraordinary post-GFC period of suppressed monetary policy. If the neutral interest rate — the rate at which monetary policy neither stimulates nor restricts the economy — has structurally shifted higher, then 4.60% may not actually be very restrictive. Matusik points to rising government debt, persistent fiscal deficits, capital-intensive energy transition investment, AI infrastructure demand, and limited productivity growth as forces that keep upward pressure on the neutral rate.
**Rates simply stay.** This is Matusik's primary scenario, and the one he believes deserves the most attention. He forecasts one or two more 0.25% increases over the next six months, taking the cash rate to around 4.85%–5.10%, followed by a prolonged plateau. In this scenario, the RBA doesn't have sufficient grounds to cut because underlying inflation — while moderating — settles somewhere in the 3%–4% range, above target but not high enough to justify further tightening. "The cash rate might simply sit somewhere around 4.5% to 5%," Matusik writes.
What This Means for Your Home Loan
Whether Matusik's "rates stay" scenario plays out or rates gradually fall, the message for borrowers is consistent: plan your finances for mortgage rates above 6%, and don't build your budget around an imminent rescue from the RBA.
The broader economic backdrop supports a cautious approach. Property Update's summary of the RBA's October 2026 Chart Pack shows Australian GDP grew just 0.4% in the June quarter — 2.1% on an annual basis. The Consumer Price Index rose 4.0% in the year to August 2026, still above the RBA's 2%–3% target band. The unemployment rate has ticked up to 4.6%. Three of Australia's four major banks believe rates have peaked and will fall in 2027, but the fourth is less certain — and the market remains split on whether November brings another hike.
There are reasons not to panic. Home loan arrears remain at post-GFC lows, suggesting the majority of mortgage holders are still managing their repayments despite the increases. Australia's residential property market is valued at over $12.2 trillion, against only $2.6 trillion in debt outstanding. Fifty per cent of homeowners carry no mortgage at all. The aggregate picture is one of resilience even as individual household budgets feel squeezed.
But for borrowers carrying significant debt at variable rates, the structural shift Matusik identifies matters. The era of cheap money was built on factors unlikely to return: suppressed global inflation, central bank quantitative easing, excess global savings, and decades of falling production costs from globalisation. Those conditions are gone. Defence spending is rising. The energy transition requires enormous capital. AI and data centre infrastructure demands mountains of investment. Supply chains are more fragile and more expensive.
Planning for rates above 6% for several years ahead isn't pessimism — it's prudence.
Practical Steps for Today's Rate Environment
If your variable rate is above 6.5%, checking whether a refinance to a lower-rate lender makes sense should be a near-term priority. Use the refinance savings calculator to model what switching lenders could save you annually — even a 0.4% rate reduction on a $600,000 loan saves over $2,400 per year.
If you're buying for the first time and waiting for rates to fall before entering the market, consider whether that waiting period is realistic given Matusik's analysis. The first-home buyer hub can help you understand your current options, including government schemes that reduce the deposit required.
If your primary concern is repayment certainty in a higher-for-longer environment, a fixed or split loan structure is worth exploring. The goal isn't to predict where rates go — it's to remove damaging variability from your household budget.
The borrowers who navigate this period best will be those who stress-test their finances against rates remaining elevated, rather than those who are waiting to be saved by cuts that may be further away — and smaller — than the forecasts suggest.
Read Michael Matusik's full analysis at Property Update.