RBA Cup Day hike takes interest rates to 18-year highs
Key takeaways
- The Reserve Bank of Australia (RBA) has increased the cash rate to 4.85%, a high not seen in 18 years.
- Inflation is still too high and doesn't seem to be slowing down, prompting today's hike.
- What's next: Lenders will begin raising interest rates on home loans in the coming days.
The Reserve Bank of Australia (RBA) decided to raise the official cash rate by 25 basis points to 4.85% at its meeting today.
The move was widely expected, with 75% of Finder's experts predicting today's hike.
Today's rate hike takes interest rates to levels Australian borrowers haven't seen in years. The cash rate spent most of 2011 at 4.75%.
Prior to that, you have to go back to the Global Financial Crisis, when the cash rate plunged from 7.25% in August 2008 to 3.0% by April 2009.
More bad news for borrowers
Today's rate hike alone will add over $100 a month to the average borrower's mortgage repayments.
But borrowers were already struggling before today's decision. This is now the fifth rate hike in 2026.
35% of Australian borrowers in Finder's Consumer Sentiment Tracker say they're currently struggling with home loan repayments.
If your variable home loan interest rate was 5.0% in January, it's now closer to 6.25%. Those hikes have added hundreds of dollars a month to the average borrower's mortgage.
Here's what that looks like in dollar figures.
- You have a 30-year home loan
- You borrow $730,000 (that's about the average home loan size now)
- Your monthly repayments at 5.0% = $3,919
- Your monthly repayments at 6.25% = $4,495
That's $576 more per month.
Inflation is still too high and it isn't slowing down
Last week's monthly inflation statistics showed that not only is annual inflation still too high at 4.3%, but the pace of inflation is speeding up.
That's the opposite of what the RBA wants to achieve with its interest rate policy.
We may see more rate hikes in the months ahead.
Good news for savers at least
There is a silver lining for anyone with a high interest savings account. Banks will also lift savings rates after the RBA's rate hike today.
We could soon see the top savings rates reach 6.50%.
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