Australian homeowners have been hit with a record tenth consecutive interest rate rise by the Reserve Bank of Australia as it struggles to deal with inflation.
The interest rate rise today of 25 basis points takes the cash rate to 3.60%. Its highest in over a decade and is the latest in one of the RBA’s most aggressive rate cycles in history. The cash rate has incrementally climbed 3.55% since May of last year.
“The Board is seeking to return inflation to the 2–3 per cent target range while keeping the economy on an even keel,”. the RBA said in a statement explaining their decision.
The rise, while expected to add to the ongoing mortgage and cost of living pressures of homeowners, is something that experts have been predicting would happen today at the latest RBA meeting.
Finder RBA Cash Rate Survey polled 42 experts and economists this month, with 39 of them expecting another cash rate rise in March.
Graham Cooke, head of consumer research at Finder, said that this rate rise was bad news for homeowners already doing it tough.
“Australians with the average loan size of around $600k will be forking out over $13,000 more per year on their mortgage compared to what they were paying a year ago,” Cooke said. “While homeowners deserve a break from the relentless increase in pressure, we can expect ever more hikes from the RBA this year
Although 3.60% is high, the experts polled by Finder are now predicting that the cash rate still has a way to go before the RBA eases off. Most have said they expect it to hit 4.10%, meaning we have another two interest rate hikes to go. The cash rate is expected to peak in the first half of this year.
Indeed, the RBA themselves also said that they expect “further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary”.
Already, 36% of Aussie homeowners have said that they are struggling to pay their current mortgage repayments as of February. It’s likely that the true cost of the interest rate rises won’t yet have hit mortgage holders, as there is typically a lag between rate rises and repayment increases during a standard mortgage cycle.
Average Aussie Mortgage Repayments
| Cash rate | Average home loan rate* | Average monthly repayment | Average monthly increase | Average annual repayment | Average annual increase | |
| April 2022 | 0.10% | 3.45% | $2,697 | – | $32,364 | – |
| March 2023 (full rate rise applied) |
3.60% | 6.47% | $3,808 | $1,111 | $45,696 | $13,332 |
| 4.10% (predicted peak) | 4.10% | 6.97% | $4,009 | $1,312 | $48,108 | $15,744 |
| Source: Finder, RBA.
*Owner-occupier variable discounted rate. Repayments based on the average loan of $604,346 (ABS data analysed by Finder). |
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Many have criticised the RBA’s decision to keep on ratcheting up the interest rates. The Greens called these choices “institutional madness” and “a clear indication that the central bank is out of control and needs to be reined in.”
“The RBA itself has found that inflation is being primarily driven by supply side shocks and corporate profiteering, and has admitted that there is very little that monetary policy can do to offset supply shocks,” said the Greens Economic Justice spokesperson, Senator Nick McKim, in a statement.
“It has also said that the monthly CPI indicator suggests inflation has peaked. Yet despite all this, the RBA continues its relentless interest rate rises.”
The Federal Government’s Finance Minister, Katy Gallagher, told ABC News Breakfast on Wednesday that the government was sympathetic to the cost of living pressures, but ultimately, the RBA has a job to do.
“Our job is to look at what we can do to make a difference there in a sensible and affordable way, but not make the bank’s job harder at the moment,” she said.
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