Mortgage holders, renters and small businesses face renewed financial pressure as the cash rate reaches an 18-year high, with Christmas spending approaching.
The RBA interest rate rise to 4.85 per cent has pushed the official cash rate to its highest level since 2008, adding to household and business cost pressures just weeks before Christmas.
The Reserve Bank of Australia announced the 0.25 percentage point increase on Tuesday, 3 November. It is the fifth rise in 2026, lifting the cash rate from 4.60 per cent.
The bank says higher borrowing costs are needed to contain inflation, although it expects the rate increases to weigh on household spending and economic activity.
RBA interest rate rise and the cost of living
The latest Australian Bureau of Statistics figures show annual inflation reached 4.3 per cent in September. Housing costs rose 5.2 per cent over the year, transport increased 8.7 per cent and food prices climbed 3.2 per cent.
According to Canstar, a household with a $600,000 mortgage could pay approximately $92 more each month if its lender passes on the latest increase. Across all five rises this year, the estimated increase would be about $456 per month, based on Canstar’s loan assumptions.
In October, STPL News reported an estimated 7,818 households in Frankston’s 3199 postcode were experiencing mortgage stress in the June quarter, according to modelling cited by Frankston City Council.
Housing affordability and rental pressures
Housing affordability and availability remain concerns across the Mornington Peninsula. Mornington Peninsula Shire reports a 35.3 per cent rental stress rate, compared with 26.8 per cent across Greater Melbourne. It also identifies more than 2,600 social housing waitlist applications and over 5,000 short-term rental properties.
The shortage of affordable accommodation has wider consequences. In October, STPL News reported four deaths among people sleeping rough on the Mornington Peninsula within six weeks.
National housing advocacy group Everybody’s Home says renters should not be overlooked when discussing the impact of higher rates.
Renters mustn’t be overlooked in the rate rise discussion.
Maiy Azize, Everybody’s Home spokesperson
The group says its recent survey found roughly three in four respondents would need to cut spending if rent or mortgage costs rose by just $20 a week. A cash rate increase does not automatically lead to higher rents, but the group is concerned about pressure on renters and prospective first-home buyers.
Small businesses face Christmas uncertainty
CPA Australia warns that higher borrowing costs could make businesses more cautious about investment, hiring and expansion, particularly if consumers reduce spending.
There is no guarantee this is the last rate rise.
Gavan Ord, Business and Investment Lead, CPA Australia
The timing adds uncertainty for retailers and hospitality operators preparing for the Christmas trading period.
Deloitte’s 2026 Retail Report found 34 per cent of surveyed consumers planned to restrict holiday spending, while 32 per cent expected to choose cheaper alternatives. Despite this, 77 per cent of surveyed retailers anticipated sales growth during the holiday period.
For businesses across the Mornington Peninsula and Frankston, decisions about household spending will be an important consideration in November and December.
Will interest rates rise again?
In its 3 November statement, the RBA warned that inflation could remain elevated through much of 2027. It expects its next decision to be announced on 8 December 2026.
Have your say: How is the rising cost of living affecting you and your Christmas plans?
