The Reserve Bank of Australia has hiked interest rates for the fourth consecutive month, lifting the nation's cash rate target by 50 basis points to 1.85 per cent.
Today's increase marks the first time since the introduction of inflation targets in 1990 that the central bank has increased the cash rate four months in a row.
For the average borrower with a $500,000 loan and 25 years remaining, this afternoons' increase will result in a $140 a month increase – or $472 since the RBA began lifting rates in May 2022.
READ MORE: 'Historic' interest rate hike tipped to hit mortgage holders
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It appears that borrowers should expect much of the same over the coming months.
Anneke Thompson, Chief Economist at CreditorWatch, said Australia's extraordinary economic conditions are fuelling inflation, which the RBA will attempt to tame with more rate rises.
"The Reserve Bank of Australia (RBA) has once again decided to raise the cash rate target. This is the fourth month in a row, indicating the level of concern that inflation is causing. Contributing to the decision was July's employment data which saw the unemployment rate drop to 3.5 per cent. There are now 600,000 more Australians employed than there were in March 2020 – an extraordinary increase," Thompson explains.
"The economic update provided by the Treasurer last week pointed to inflation peaking toward the end of the year, at near 8 per cent, before starting to fall in 2023.
"While this is clearly of concern, the RBA will no doubt be focused on trying to break out supply side inflation, versus the demand side, and tailoring their monetary policy response as close as possible to this."
Speaking in question time, Treasurer Jim Chalmers has said while the RBA's interest rates hike isn't surprising, it will "still sting" Australians.
"Australians knew this was coming, but it won't make it any easier for them to handle," he said.
"This cycle of interest rate rises began before the election in response to inflationary pressures that began accelerating at the beginning of this year.
"Average homeowners with a $330,000 outstanding balance will have to find about $90 a month more for repayments as a consequence of this decision today, on top of around $220 extra in repayments since early May.
"For Australians with a $500,000 mortgage, it's about an extra $140 a month, in addition to the extra $335 they've had to find since early May.
"As I said, Mr Speaker, this decision doesn't come as a surprise. It's not a shock to anybody, but it will still sting."
Mortgage repayment hikes with a 0.50 per cent hike
|
Loan size: |
Increase per month: |
Increase since May 2022: |
|
$500,000 |
$140 |
$472 |
|
$750,00 |
$211 |
$708 |
|
$1 million |
$281 |
$944 |
*Source: RateCity.com.au
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