RBA Forecasts Inflation Won't Return to Target Until Mid-2028 — What "Higher for Longer" Rates Mean for Self-Employed Borrowers

RBA Forecasts Inflation Won't Return to Target Until Mid-2028 — What "Higher for Longer" Rates Mean for Self-Employed Borrowers

Key takeaway: The Reserve Bank of Australia's November 2026 Statement on Monetary Policy projects that inflation will not return to the 2–3% target band until mid-2028. With the cash rate now at 4.85% and inflation running at 4.3% (September 2026), self-employed borrowers and Alt Doc loan applicants face an extended period of elevated borrowing costs — making income documentation strategy critical.

What the RBA Said on November 3, 2026

At its meeting on November 3, 2026, the RBA's Monetary Policy Board decided to lift the cash rate by 25 basis points to 4.85%. This was the fifth rate increase in 2026 alone. Alongside the rate decision, the Bank published its updated Statement on Monetary Policy, which revealed a key forecast: inflation in Australia is not expected to return to the 2–3% target band until mid-2028.

According to reporting by The Adviser (November 4, 2026), this updated forecast represents a significant extension of the high-rate timeline compared to previous projections. For mortgage holders, this means the period of elevated repayments is not nearing its end — it is likely only halfway through.

"Inflation won't return to target until mid-2028, says RBA — a forecast that reframes the question from 'when will rates fall?' to 'how do I manage my mortgage through 18 more months of pressure?'"

Why This Matters More for Self-Employed Borrowers

For salaried employees, sustained high rates mean higher repayments — uncomfortable, but mathematically manageable if income is stable and predictable. For self-employed borrowers — sole traders, restaurant owners, small business operators, contractors — the challenge compounds.

Elevated rates mean:

1. Higher serviceability hurdles: Banks calculate borrowing capacity using a serviceability buffer. With rates at 4.85%, the buffer-adjusted assessment rate can exceed 7.5–8%, making it very hard to meet standard bank income requirements.
2. Income volatility is punished: Business income often varies year-to-year. Standard bank assessment methods use a two-year average, which may not reflect the current earning capacity of a business that has grown or stabilised.
3. Lower borrowing power, longer approval timelines: The longer rates remain high, the more borrowers are declined at the first stage of a bank application, forcing them to seek non-bank alternatives urgently rather than proactively.

How the "Higher for Longer" Forecast Changes Planning for Alt Doc Borrowers

If the RBA's inflation trajectory is correct, Australian borrowers should plan for a cash rate of approximately 4.5–4.85% through at least mid-2028. This reframes borrowing strategy in several ways.

For self-employed borrowers considering property purchase or refinancing, the question is no longer "should I wait for rates to fall?" — the answer to that is now clearly "not soon." Instead, the relevant questions are:

• Can I document my income in a way that accurately reflects my actual earning capacity?
• Is an Alt Doc loan — using BAS statements, accountant letters, or bank statements — the right pathway to avoid the standard bank serviceability assessment?
• Does refinancing now, while my equity position is still relatively solid, make more sense than waiting?

"The best time to plan for a high-rate environment is before you need to refinance under pressure — not after."

What MPFG's Alt Doc Borrowers Should Consider Now

MPFG Capital's Bright product is designed precisely for this environment. Rather than relying on two-year tax returns that may understate current income — or trying to meet a 7.5% serviceability buffer that excludes many legitimate business owners — Bright allows income verification through:

• BAS statements (last 12 months)
• Accountant declaration letters confirming business income
• Bank statements as supplementary evidence

For borrowers looking to plan through the mid-2028 inflation horizon, MPFG also offers fixed and variable rate structures under its broader product suite, including Alt Doc and self-employed home loans.

The key message: with up to 18 months of elevated rates ahead, the borrowers who navigate this best will be those who choose the right lending pathway now — not those who wait for conditions to ease.

FAQ

What does it mean that the RBA says inflation won't return to target until mid-2028?

It means the RBA expects interest rates to remain elevated for longer than previously forecast. The cash rate is unlikely to be meaningfully cut before mid-2028, so borrowers should plan for mortgage repayments at current or similar levels for at least the next 18 months.

How does "higher for longer" affect self-employed borrowers specifically?

Self-employed borrowers often have variable income that is harder to demonstrate through standard bank serviceability models. With the serviceability buffer adding approximately 2–3% to the assessment rate, many business owners will find bank approval very difficult. Alternative documentation (Alt Doc) loans from non-bank lenders assess income differently, using BAS statements or accountant letters instead of traditional payslips.

Should self-employed borrowers wait for interest rates to fall before applying for a loan?

Based on the RBA's November 2026 forecast, waiting is unlikely to be beneficial — rates are not expected to fall significantly before mid-2028. For borrowers who need to purchase or refinance, acting now with the right loan structure (such as an Alt Doc product) is a more effective strategy than deferring.

This article is general information only and does not constitute financial or credit advice. All applications are subject to credit assessment by MPFG Capital (ACL 553698).